Yelp statements about its filters not protected by anti-SLAPP law or CDA

Demetriades v. Yelp, Inc., 2014 WL 3661491, No. B247151 (Cal. Ct. App. July 24, 2014)

Demetriades operates restaurants and sued Yelp under California’s UCL and FAL based on claims about the accuracy and efficacy of its “filter” of unreliable or biased customer reviews. The trial court granted Yelp’s anti-SLAPP motion and the court of appeals reversed.

The court noted that

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.

This may ultimately help Yelp prevail on the merits, but it doesn't today.

Demetriades, who’d advertised on Yelp, alleged that Yelp engaged in false advertising by claiming that each user review passed through a filter that gave consumers “the most trusted reviews” and by making related claims about the reliability of its filtering.   Demetriades alleged that these statements were false and misleading, and that the filter suppressed more than a small portion of reviews; allowed “most entertaining” reviews to be shown regardless of the source; allowed reviews on 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.

The trial court granted Yelp’s special motion to strike, because Yelp met its initial burden of showing that its statements arose from protected activity; statements about filtering on social media are matters of public interest.  The anti-SLAPP law’s public interest exemption didn’t apply because the case wasn’t brought solely in the public interest; Demetriades had a personal financial interest.  The commercial speech exemption didn’t apply because the statements about filtering didn’t relate to selling advertising, and also Demetriades failed to show that they were statements of fact and not puffery.  Demetriades failed to establish a probability of prevailing on the merits because he didn’t own the restaurants and thus lacked standing, and because the statements were puffery/opinion.  (I note some tension between the argument that Demetriades had a personal stake in the claim and that he lacked standing, but the court doesn’t go there.)

First, the court said that the business entity that owned the restaurants was the proper plaintiff, but could be substituted in by amending the complaint. 

 Then, the court found that Yelp’s statements about its review filter were commercial speech squarely within the relevant exemption from the anti-SLAPP law (for the record, § 425.17(c)). This exemption says that the law

does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services [when] [¶] (1) The statement or conduct consists of representations of fact about that person’s or a business competitor’s business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person’s goods or services, or the statement or conduct was made in the course of delivering the person’s goods or services; and [¶] (2) the intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer....”

“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.”  Under Kasky v. Nike, distinguishing commercial from noncommercial speech requires considering the speaker, the intended audience, and the content of the message.  Here, Yelp’s statements about its review filter 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 businesses on Yelp to purchase advertising).”  Statements about the efficacy of the review filter were representations of fact, not mere puffery or opinion.  A key factor in distinguishing puffery from fact is specificity.  The following Yelp statements were factual claims:

·         “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.”

They were intended to induce consumer reliance on Yelp reviews “by making specific and detailed statements intended to induce reliance.”  The reference to Yelp’s “engineers” would inspire confidence.  Though Yelp used words of emphasis like “remarkable,” its specific representations went beyond mere opinion or puffery.  It would be illogical to conclude that Yelp’s statements that all reviews were filtered was intended to mean anything other than what it said.  “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.”  (This is Ivan Preston’s argument that by default no statement an advertiser takes the trouble to make prominently should be considered puffery.)

The next step was whether the intended audience was an actual or potential buyer or customer or a person likely to influence an actual or potential buyer or customer.  Yelp only receives direct revenue from businesses that advertise, but they wouldn’t do that without the potential benefit from user reviews and without assurances that potential patrons would be reading only reliable reviews.  The user reviews were a device by which Yelp carried out its primary business of providing advertising to business.  “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.”

Demetriades wasn’t trying to stop use of the filter, but to enjoin allegedly false statements of fact. This wouldn’t interfere with reviews or legitimate speech.

Finally, the CDA didn’t bar these claims. “Nowhere does plaintiff seek to enjoin or hold Yelp liable for the statements of third parties (i.e., reviewers) on its website. Rather, plaintiff seeks to hold Yelp liable for its own statements regarding the accuracy of its filter.”