LegalZoom.com Inc v. Rocket Lawyer Incorporated

Filing 119

NOTICE SUBSEQUENTLY DECIDED CASE PRECIDENT RELEVANT TO LEGALZOOM.COM, INC.'S MOTION FOR PARTIAL SUMMARY JUDGMENT filed by Plaintiff LegalZoom.com Inc. (Attachments: # 1 Exhibit A)(Heather, Fred)

EXHIBIT A

Levitt v. YelpA Inc., --- F.3d ---- (2014)
14 Cal. Daily Op. Serv. 10,292

2014 WL 4290615
Only the Westlaw citation is currently available.
United States Court of Appeals,
Ninth Circuit.
Boris Y. LEVITT, on behalf of himself and all
others similarly situated, dba Renaissance
Restoration; Cats and Dogs Animal Hospital, Inc.;
Tracy Chan, dba Marina Dental Care; John
Mercurio, dba Wheel Techniques,
Plaintiffs–Appellants,
v.
YELP! INC., Defendant–Appellee.
No. 11–17676. | Argued and Submitted July 11, 2013.
| Filed Sept. 2, 2014.

Lawrence Dale Murray (argued), John Henning III, and
Robert C. Strickland, Murray & Associates, San
Francisco, CA, for Plaintiffs–Appellants.
S. Ashlie Beringer (argued) and Molly Cutler, Gibson
Dunn & Crutcher, Palo Alto, CA; Gail Ellen Lees, Gibson
Dunn & Crutcher, Los Angeles, CA; and Aaron Schur,
Yelp Inc., San Francisco, CA, for Defendant–Appellee.
Appeal from the United States District Court for the
Northern District of California, Edward M. Chen, District
Judge, Presiding. D .C. Nos. 3:10–cv–01321–EMC,
3:10–cv–02351–EMC.
Before RICHARD A. PAEZ, MARSHA S. BERZON,
and RICHARD C. TALLMAN, Circuit Judges.

OPINION
Synopsis
Background: Small business owners brought putative
class action against operator of online directory for users’
reviews and ratings for business services, asserting claims
for violation of California’s Unfair Competition Law
(UCL), civil extortion, and attempted civil extortion,
based on allegations that operator manipulated user
reviews/ratings and penned negative reviews of owners’
businesses, to induce owners to purchase advertising on
operator’s website. The United States District Court for
the Northern District of California, Edward M. Chen, J.,
2011 WL 5079526, granted operator’s motion to dismiss
for failure to state a claim. Owners appealed.

Holdings: The Court of Appeals, Berzon, Circuit Judge,
held that:
[1]

allegations failed to state a claim for economic
extortion under Hobbs Act or California civil law, relating
to removal of positive reviews;

[2]

allegation that operator wrote two negative reviews was
not plausible; and

[3]

business-competitor claim under UCL was not stated.

BERZON, Circuit Judge:
*1 Today, individuals can share their opinions with the
entire world courtesy of a few taps on the keyboard. The
appellee in this case, Yelp! Inc. (“Yelp”), provides an
online forum on which its users express opinions as to
services ranging from dog walkers to taco trucks.
The appellees, Boris Levitt, Cats and Dogs Animal
Hospital, Inc. (“Cats and Dogs”), John Mercurio, and Dr.
Tracy Chan, are small business owners (collectively, “the
business owners”) who allege that Yelp extorted or
attempted to extort advertising payments from them by
manipulating user reviews and penning negative reviews
of their businesses. The business owners filed a
class-action lawsuit against Yelp for violations of
California’s Unfair Competition Law (“UCL”), California
Business & Professions Code § 17200 et seq., civil
extortion, and attempted civil extortion.
[1]

The district court dismissed the lawsuit for failure to
state a claim. We review the dismissal de novo, see
Wilson v. Hewlett–Packard Co., 668 F.3d 1136, 1140 (9th
Cir.2012), and, holding that the facts and legal theories
alleged in the business owners’ complaint are insufficient
to make out a prima facie case of unlawful or unfair
business practices against Yelp, affirm.

Affirmed.
Attorneys and Law Firms

© 2014 Thomson Reuters. No claim to original U.S. Government Works.

I.
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A. Yelp’s Service
Yelp provides an online directory that allows registered
users to post reviews and rank businesses on a scale of
one to five stars. Based on these user rankings, Yelp then
assigns businesses an overall “star” rating. Businesses
cannot opt out of being listed on Yelp.
Not all user reviews submitted appear on a business’s
Yelp page or remain there after initially appearing.
Reviews can be removed by the reviewer, removed by
Yelp for violating Yelp’s “Review Guidelines” or “Terms
of Service,” or removed by an automated filtering
software maintained by Yelp. According to Yelp’s
website, its filtering system operates as follows:
Th[e]
system
decides
how
established a particular reviewer is
and whether a review will be
shown based on the reviewer’s
involvement on Yelp. While this
may seem unfair ... this system is
designed to protect both consumers
and businesses alike from fake
reviews (i.e., a malicious review
from a competitor or a planted
review from an employee). The
process is entirely automated to
avoid human bias, and it affects
both positive and negative reviews.
It’s important to note that these
reviews are not deleted (they are
always shown on the reviewer’s
public profile) and may reappear on
your business page in the future.
Yelp also offers businesses advertising opportunities on
its website for $300 to $1200 per month. Purchasing
advertising allows a business to: appear in advertisements
displayed above Yelp search results and on related
business pages; prevent competitors’ advertisements from
appearing on its Yelp page listing; enhance its page listing
with photos; and promote a favorite review to the top of
its page.1

B. The Allegations Against Yelp
*2 The business owners maintain that Yelp created
negative reviews of their businesses and manipulated
review and ratings content to induce them to purchase
advertising through Yelp. They urge that Yelp has thereby
violated the UCL through acts of extortion and, when not
successful in inducing payments to Yelp, attempted
extortion. They also allege separate causes of action for

civil extortion and attempted civil extortion.
The business owners seek to represent two subclasses of
businesses: those that declined to advertise with Yelp
(“nonsponsors”), and those that have, at some point,
purchased advertising (“sponsors”). They support their
claims by alleging that “approximately 200 Yelp
employees or individuals acting on behalf of Yelp have
written reviews of businesses on Yelp” and that Yelp’s
Chief Executive Officer admitted to a New York Times
reporter that Yelp has paid users to write reviews,
although it does not do so directly anymore.
The Third Amended Complaint contains the following
plaintiff-specific allegations:

a. Boris Levitt
Levitt, the owner of a furniture restoration business,
alleged that several positive reviews disappeared from his
business’s Yelp page, causing the overall star rating of his
business to decline. Levitt contacted Yelp to ask why a
certain positive review had disappeared from his
business’s page and was told by a Yelp agent that she
could not assist him.
Two months later, a Yelp sales representative contacted
Levitt to invite him to advertise with Yelp. Levitt
declined, stating that he already had a “high volume of
users reviewing his business page” and “an overall rating
of 4.5 stars.”
According to Levitt, two days after he declined to
purchase advertising, several five-star reviews
disappeared from his page, leaving his business with an
overall star rating of three-and-a-half stars. Levitt asserted
that “Yelp manipulated the reviews of [his] business
because he did not purchase advertising,” and did so “as a
threat” made to induce him to purchase advertising. As a
result of the lower overall rating, Levitt alleged, his
business reputation and revenues declined.

b. Cats and Dogs Animal Hospital
Cats and Dogs is an animal hospital in Santa Barbara. Its
allegations center on reviews from two negative users.
Cats and Dogs contacted Yelp to request removal of the
first negative review, posted by Yelp user “Chris R.,”
because the review referred to a visit that occurred outside
of Yelp’s twelve-month policy. That review was
subsequently removed, but another negative review from
a different user, “Kay K.,” showed up soon afterwards on

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the Cats and Dogs Yelp page.
Cats and Dogs states that “soon after the appearance of
these negative reviews, [it] began receiving frequent,
highpressure calls from Yelp sales representatives, who
promised to manipulate [Cats and Dogs’] listing page in
exchange for [Cats and Dogs’] purchasing ... advertising.”
Cats and Dogs alleged it received a call from a Yelp sales
representative who stated that Yelp would “hide negative
reviews” or “place them lower on [Cats and Dogs] listing
page” if Cats and Dogs purchased advertising. Cats and
Dogs declined. According to Cats and Dogs, a week after
it rejected this particularly explicit advertising pitch, the
Chris R. review reappeared, followed by a second
negative review from Kay K. Cats and Dogs alleged that
“Yelp re-posted the ‘Chris R’ and two ‘Kay K’ reviews
and/or manufactured its own reviews to instill fear in
[Cats and Dogs] to advertise.” Cats and Dogs further
alleged that “[a]s a result of Yelp’s conduct,” Cats and
Dogs’ business revenues and reputation were injured.

c. Mercurio
*3 Mercurio owns Wheel Techniques, an automobile
body repair shop. He alleged that Yelp posted “false
reviews,” meaning reviews not composed by actual
customers, “as a threat to induce Wheel Techniques to
advertise.” He based his allegation on the appearance of
“negative reviews ... on Wheel Techniques’ Yelp review
page” that did not correspond to customer records and
contemporaneous “telephone calls from Yelp requesting
that [Wheel Techniques] purchase advertising.”
Mercurio stated that he “called Yelp to inquire about why
one of his competitors, known in the industry for its
‘shotty [sic] work,’ “ had a high overall star rating. Yelp
allegedly responded that the competitor advertised and
that “[Yelp] work[s] with your reviews if you advertise
with us.” Later, when Mercurio declined an offer to
advertise on Yelp, he alleges that “[w]ithin minutes,” “a
one-star review was moved to the top of [Wheel
Techniques’] Yelp review page ... as a threat to cause
Wheel Techniques to fear that if it did not pay Yelp
money to advertise, the negative review would remain at
the top of its Yelp review page.”
Mercurio also alleged that he “was told ... that a former
Yelp employee stated that Yelp ... terminated a group of
sales employees ... as a result of scamming related to
advertising.” The Third Amended Complaint does not
indicate who told Mercurio this information, nor does it
identify the Yelp employee who allegedly made the
original statement or of what the “scamming related to
advertising” consisted.

d. Dr. Tracy Chan
Chan, a dentist, stated that she received calls from a Yelp
sales representative “offer[ing] her lots of benefits, such
as the opportunity to keep Chan’s business ratings high by
hiding or burying bad reviews,” if she advertised with
Yelp. According to Chan, the sales representative stated
that “although many Yelp reviews were manipulated by a
computer system, Yelp employees also had the ability to
remove reviews from a business’s Yelp page.”
Chan initially declined to purchase advertising from Yelp.
Two or three days after doing so, “Yelp removed nine
5–star reviews” from her page, causing her overall rating
to drop from five to three stars. Chan called Yelp to ask
about the decline in her overall rating, and was told that
“Yelp ‘tweaks’ the ratings every so often and that [Yelp]
could help her if she signed up for advertising services
with Yelp.” Chan alleged that “Yelp removed positive
reviews ... as a threat to cause Chan to fear that if she did
not purchase advertising ... her business’s overall star
rating would stay low.”
“[O]ut of fear of further manipulations,” Chan signed an
advertising contract with Yelp. According to Chan, just
days after signing the contract, her “overall rating
increased to 4 stars and various five star reviews were
reinstated by Yelp.” She believes the rating increase was
the result of her agreeing to advertise with Yelp.
*4 Several months later, a Yelp sales agent asked Chan
whether she was interested in increasing her advertising
purchase with Yelp. When Chan declined, she “noticed
that her reviews were again declining.” That same month,
Chan cancelled her existing advertising contract with
Yelp. Chan alleged that after she cancelled, “Yelp
removed positive reviews ... and replaced them with
negative reviews ... to cause Chan to fear that if she did
not pay Yelp for advertising, Yelp would continue to
remove positive reviews from her [page].”
Chan’s overall rating fluctuated over the next year and a
half. She attributed dips in her rating to specific
interactions with Yelp. For example, Chan stated that
Yelp “removed several positive reviews,” prompting her
to “post a negative review about Yelp’s conduct” on her
Yelp page. “Within two to three days,” she alleged, Yelp
removed more positive reviews, causing her overall rating
to “[fall] to 3 stars.” Over a year later, Chan alleged that
her overall rating fell again, this time from four stars to
three and a half stars, when “Yelp removed six positive
reviews” from her page after she “posted a negative
review about Yelp to her own website.” Chan asserted

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that the removal of positive reviews was done “to induce
[her] to pay for advertising and/or to discourage her from
posting negative information about Yelp.”

C. District Court’s Rulings
The district court dismissed the business owners’ Second
Amended Complaint for failure to state a claim upon
which relief could be granted. With respect to the
business owners’ claim that Yelp’s conduct violated
California’s UCL, the district court ruled that: theories of
extortion for failure to remove negative user reviews were
covered by Yelp’s immunity under the Communications
Decency Act of 1996 (“CDA”), 47 U.S.C. § 230(c)(1);
there were insufficient facts from which to infer that Yelp
authored or manipulated the negative reviews and ratings;
and there were insufficient factual allegations from which
to infer communication of an extortionate threat.
After the business owners amended their complaint to fix
these deficiencies, the district court again dismissed it for
failure to state a claim. Describing the allegations that
Yelp manufactures negative reviews as “entirely
speculative,” the district court concluded that the Third
Amended Complaint failed to allege facts sufficient to
support a conclusion that Yelp authored content. Even
assuming Yelp employees had authored reviews, the
district court found only “a mere possibility” that Yelp
authored content to extort advertising payments. The
district court further found that “allegations based on
Yelp’s purported manipulation of user-generated content”
were immunized by the CDA. The separate civil extortion
and attempted civil extortion claims failed for the same
reasons.
This appeal followed.

unlawful, unfair or fraudulent business act or practice and
unfair, deceptive, untrue or misleading advertising.” Cal.
Bus. & Prof.Code § 17200. “[I]t establishes three varieties
of unfair competition—acts or practices which are
unlawful, or unfair, or fraudulent.” Cel–Tech Commc’ns,
Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 180, 83
Cal.Rptr.2d 548, 973 P.2d 527 (1999) (internal quotation
marks omitted).
[2]

In prohibiting “any unlawful” business practice, the
UCL “borrows violations of other laws and treats them as
unlawful practices that the unfair competition law makes
independently actionable.” Id. (internal quotation marks
omitted); see also Davis v. HSBC Bank Nev., N.A., 691
F.3d 1152, 1168 (9th Cir.2012). The business owners
premise their “unlawful” UCL claim on Yelp’s allegedly
extortionate conduct.
Specifically, they allege that the following conduct
amounts to extortion: (1) Yelp manipulating
user-generated reviews to induce them to buy advertising;
and (2) Yelp creating its own negative reviews of their
businesses to induce them to buy advertising. They do not
assert any claims based on failure to remove negative
third-party reviews of their businesses.
We conclude, first, that Yelp’s manipulation of user
reviews, assuming it occurred, was not wrongful use of
economic fear, and, second, that the business owners pled
insufficient facts to make out a plausible claim that Yelp
authored negative reviews of their businesses.
Accordingly, we agree with the district court that these
allegations do not support a claim for extortion.

B. Unlawful (Extortionate) Business Practices
We first consider whether the business owners have stated
a claim of extortionate, and therefore unlawful, business
practices under California’s UCL.
II.

The business owners maintain that Yelp attempted to
extort and did extort advertising payments from them by
wrongfully threatening them with economic loss. We hold
that the business owners have failed to state a claim under
California law on which relief can be granted.
Accordingly, we do not address Yelp’s defense of
immunity under the CDA.

A. California’s Unfair Competition Law
*5 California’s Unfair Competition Law prohibits “any

1
[3]

The Hobbs Act defines extortion as “the obtaining of
property from another, with his consent, induced by
wrongful use of actual or threatened force, violence, or
fear, or under color of official right.” 18 U.S.C. §
1951(b)(2) (emphasis added). Threats of economic harm
made to “obtain [ ] ... property from another,” id., are not
generally considered “wrongful,” id., where the alleged
extortioner has a legitimate claim to the property obtained
through such threats. Brokerage Concepts, Inc. v. U.S.

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Healthcare, Inc., 140 F.3d 494, 523 (3d Cir.1998).
Therefore, unless a person has a preexisting right to be
free of the threatened economic harm, threatening
economic harm to induce a person to pay for a legitimate
service is not extortion. See United States v. Vigil, 523
F.3d 1258, 1265 (10th Cir.2008) (citing United States v.
Enmons, 410 U.S. 396, 400, 93 S.Ct. 1007, 35 L.Ed.2d
379 (1973)); Viacom Intern. Inc. v. Icahn, 747 F.Supp.
205, 213 (S.D.N.Y.1990).
Enmons is the starting point for the interpretation of
“wrongful” in the extortion statute. 410 U.S. 396, 93 S.Ct.
1007, 35 L.Ed.2d 379 (1973). Enmons held that the use of
violence in a labor strike to obtain higher wages and other
benefits did not constitute extortion under the Hobbs Act.
Id. at 400. In so holding, Enmons explained that “[t]he
term ‘wrongful,’ which ... modifies the use of each of the
enumerated means of obtaining property—actual or
threatened force, violence, or fear—would be superfluous
if it only served to describe the means used.” Id. at 399.
“Rather, ‘wrongful’ ... limits the statute’s coverage to
those instances where the obtaining of the property would
itself be ‘wrongful’ because the alleged extortionist has
no lawful claim to that property.” Id. at 400. Thus,
Enmons concluded that the “[Hobbs] Act does not apply
to the use of force to achieve legitimate labor ends.” Id. at
401. Enmons’ reasoning “created the claim of right
defense to charges of extortion under the Hobbs Act.”
United States v. Sturm, 870 F.2d 769, 772 (1st Cir.1989).
*6 As to violent threats, we have “declined to extend
Enmons beyond the context of a labor dispute,” United
States v. Daane, 475 F.3d 1114, 1119 (9th Cir.2007),
“read[ing] Enmons as holding only that the use of
violence to secure legitimate collective bargaining
objectives is beyond the reach of the Hobbs Act,” United
States v. Thordarson, 646 F.2d 1323, 1327 (9th Cir.1981).
We have also recognized that, aside from violence, “some
attempts to obtain property ... are so inherently wrongful
that whether the defendant had a lawful claim to the
property demanded is not relevant in determining whether
extortion or attempted extortion has been proven.” United
States v. Villalobos, 748 F.3d 953, 956 (9th Cir.2014).
Though the claim-of-right defense has been limited in
other contexts, see id., it continues to apply to allegations
of extortion involving threats of economic harm. So long
as the alleged extortioner seeks payment for services that
have some “objective value,” Viacom, 747 F.Supp. at 212,
n. 7, he has “a lawful claim to the property obtained.”
Brokerage Concepts, 140 F.3d at 524. Consequently,
barring any “preexisting right to be free of the economic
fear ... utilized” on the part of the threatened party, United
States v. Tobin, 155 F.3d 636, 640 (3d Cir.1998), “purely

economic threats” do not violate the Hobbs Act, id.; see
also George Lussier Enters., Inc. v. Subaru of New
England, Inc., 393 F.3d 36, 50 (1st Cir.2004).
In Brokerage Concepts, for example, the Third Circuit
considered whether payments received by a health
maintenance organization (“HMO”) were the product of
extortion by wrongful use of economic fear. 140 F.3d at
501. In that case, the HMO refused to approve a
pharmacy branch’s application to join the HMO’s
network of medical prescription providers unless the
branch discontinued its contractual relationship with a
particular health care consulting firm and gave its
business to one of the HMO’s subsidiaries. Id. The HMO
also applied various “hard-ball” negotiation tactics, such
as auditing and putting a “freeze” on the pharmacy’s other
locations, which had previously been approved to join the
HMO’s network. Id. at 501, 506. Eventually, the
pharmacy branch acquiesced, dropped its existing
healthcare consulting firm, and made payments to the
HMO’s subsidiary.
Recognizing the undoubted value of access to the HMO’s
network, Brokerage Concepts concluded that the
payments to the HMO’s subsidiary were not the product
of extortion. Id. at 525–26. No law prohibited the HMO
from conditioning access to its network on such
payments, and the pharmacy had no “right” to access the
network. Id. at 526. Brokerage Concepts therefore
declined to interpret a “mutually beneficial exchange of
property” between “two private parties” as “the wrongful
use of economic fear.” Id.
Similarly, in Sturm, the First Circuit held that “the term
‘wrongful’ requires the government to prove, in cases
involving extortion based on economic fear, that the
defendant knew that he was not legally entitled to the
property that he [tried to obtain].” 870 F.2d at 774.
Insisting that “hard bargaining” does not amount to
extortion, the Seventh Circuit has likewise concluded that
“[w]here the defendant has a claim of right to property
and exerts economic pressure to obtain that property, that
conduct is not extortion and no violation of the Hobbs Act
has occurred.” Rennell v. Rowe, 635 F.3d 1008, 1011,
1012 (7th Cir.2011); see also United States v. Capo, 791
F.2d 1054, 1062–63 (2d Cir.1986) (noting “that fear of
economic loss plays a role in many business transactions
that are entirely legitimate” and therefore the Hobbs Act
reaches only “the exploitation of the fear of economic loss
in order to obtain property to which the exploiter is not
entitled”), vacated in part on other grounds, 817 F.2d 947
(2d Cir.1987) (en banc).
*7 As to what one may threaten to do in the economic

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context, Rothman v. Vedder Park Management, is
instructive. 912 F.2d 315 (9th Cir.1990). In that case, a
group of tenants sued the owner and operator of a
mobile-home park, claiming the owner violated the
Racketeer Influenced and Corrupt Organizations Act, 18
U.S.C. §§ 1961–68, by using extortionate tactics to induce
them to sign leases. Id. at 316. We considered, under both
the Hobbs Act and California law, whether alleged threats
that non-signers would have to pay their own utility bills
and would be subject to future rent increases of
undisclosed amounts were wrongful. Id. at 317–18.
We concluded that these threats were not wrongful and
therefore not extortionate. Id. at 318. Because the tenants
did not allege that the park owner “may not raise the rent
of those who have not signed the lease or that it may not
refuse to pay their utility bills,” the tenants had no
pre-existing right to be free of such threats. Id. Moreover,
although the park owner threatened to raise the rent, he
had a right to condition use of his mobile-home park on
payment. Id. The threats alleged did not, therefore,
amount to extortion. Id. In so holding, we relied on the
“general rule” that “what you may do in a certain event
you may threaten to do, that is, give warning of your
intention to do in that event, and thus allow the other
person the chance of avoiding the consequences.” Id.
(quoting McKay v. Retail Auto. Salesmen’s Local Union
No. 1067, 16 Cal.2d 311, 321, 106 P.2d 373 (1940)).
Sosa v. DIRECTV, Inc., is similarly instructive. 437 F.3d
923, 939–40 (9th Cir.2006). In that case, we considered
whether claim-settlement letters sent by DIRECTV
constituted “extortion” within the meaning of the Hobbs
Act and California law. Id. at 939. We declined to adopt a
broad construction of the Hobbs Act, noting that while
“[i]t is certainly possible, perhaps even likely, that the
threat of being faced with a costly lawsuit induced ‘fear’
in [the plaintiffs], ... extortion requires more than fear.”
Id. (citing Rothman, 912 F.2d at 318). We emphasized
that “[t]he use of the fear must be ‘wrongful.’ “ Id. (citing
Rothman, 912 F.2d at 318). And, although “the assertion
of weak claims predicated on unsupportable factual
allegations may be said in some sense to be wrongful,”
we rejected a reading of either the Hobbs Act or
California’s extortion statute that would impose liability
for “threats of litigation where the asserted claims do not
rise to the level of a sham.” Id. at 939–40.2
Like the Hobbs Act, California law states that “[e]xtortion
is the obtaining of property from another, with his consent
... induced by a wrongful use of force or fear.” Cal.Penal
Code § 518 (emphasis added). California law also
provides that “[f]ear, such as will constitute extortion,
may be induced by a threat ... [t]o do an unlawful injury to

the person or property of the individual threatened,” id. §
519(1) (emphasis added), “thus excluding fear induced by
threat to do a lawful injury,” People v. Beggs, 178 Cal.
79, 83, 172 P. 152 (1918); see also In re Nichols, 82
Cal.App. 73, 77, 255 P. 244 (Dist.Ct.App.1927).
Accordingly, the elements of extortion under federal and
California law are substantially the same. See Sosa, 437
F.3d at 939–40; Rothman, 912 F.2d at 317–18. The
plaintiffs here point to no pertinent distinctions between
the federal and California statutes.3
*8 [4] In sum, to state a claim of economic extortion under
both federal and California law, a litigant must
demonstrate either that he had a pre-existing right to be
free from the threatened harm, or that the defendant had
no right to seek payment for the service offered. Any less
stringent standard would transform a wide variety of
legally acceptable business dealings into extortion.

2
Given these stringent requirements, the business owners
in this case failed sufficiently to allege that Yelp
wrongfully threatened economic loss by manipulating user
reviews.
To start, we note that there is no allegation that Yelp
directly threatened economic harm if the business owners
refused to purchase advertising packages from Yelp.
While the lack of such express threats does not alone
dispose of the extortion claims, see United States v.
Marsh, 26 F.3d 1496, 1501 (9th Cir.1994), it does make
the business owners’ case considerably more difficult.
Absent explicit threats of economic harm, the business
owners must allege sufficient facts to support the
inference, In re Century Aluminum Co. Sec. Litig., 729
F.3d 1104, 1107 (9th Cir.2013), that Yelp “inten[ded] ...
to induce payment through the use of threats or the
exploitation of [economic] fears,” United States v.
Greger, 716 F.2d 1275, 1278 (9th Cir.1983).
[5]

We begin with Chan, who alleges that Yelp extorted
her by removing positive reviews from her Yelp page.
Chan asserts that she was deprived of the benefit of the
positive reviews Yelp users posted to Yelp’s website, and
that, had she received the benefits of the positive reviews,
they would have counteracted the negative reviews other
users posted.
But Chan had no pre-existing right to have positive
reviews appear on Yelp’s website. She alleges no
contractual right pursuant to which Yelp must publish

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positive reviews,4 nor does any law require Yelp to
publish them. By withholding the benefit of these positive
reviews, Yelp is withholding a benefit that Yelp makes
possible and maintains. It has no obligation to do so,
however. Chan does not, and could not successfully,
maintain that removal of positive user-generated reviews,
by itself, violates anything other than Yelp’s own
purported practice. “[W]hat [Yelp] may do in a certain
event [Yelp] may threaten to do.” Rothman, 912 F.2d at
318. Moreover, Chan does not allege that the advertising
Yelp sold her was a valueless sham, or that she was
already entitled to the advertising privileges Yelp induced
her to buy. See Viacom, 747 F.Supp. at 212 n. 7. We thus
“deal with a very narrow subset of the potential universe
of extortion cases: one involving solely the accusation of
the wrongful use of economic fear where two private
parties have engaged in a mutually beneficial exchange of
property.” Brokerage Concepts, 140 F.3d at 525–26.
As Chan alleges no independent barrier to the
ratings-manipulation of which she complains, and as there
is no allegation that Yelp’s advertising services are,
objectively, worthless, see Viacom, 747 F.Supp. at 212 n.
7, any implicit threat by Yelp to remove positive reviews
absent payment for advertising was not wrongful within
the meaning of the extortion statutes.
*9 [6] This conclusion is not entirely the end of the matter,
as Chan alleges that the ratings manipulation negatively
affected her “business’s reputation.” But Chan does not
connect her claim of reputational harm to a specific
allegation of wrongful conduct.5 We note, too, that unlike
the other business owners, Chan at one time had a
contractual relationship with Yelp. It may be that by
manipulating Chan’s ratings to induce her to increase her
advertising dollars, Yelp “breached [its] duties under the
contract [ ].” Rennell, 635 F.3d at 1014. “But those claims
should be pursued through state-law theories of contract
...—not [extortion].” Id.
Chan’s pleadings thus fail to allege that deflation of her
business’s overall rating resulting from removing positive
reviews constitutes “wrongful” conduct, and she therefore
fails to state a claim of economic extortion.
Levitt and Mercurio similarly allege that Yelp attempted
to extort them by removing positive user reviews. As with
Chan, such allegations are insufficient to show that Yelp
threatened them wrongfully.
[7]

The other brand of extortionate ratings manipulation
the business owners allege is the re-posting of negative
reviews and the placement of negative reviews at the top
of the business owners’ Yelp pages. Business owners

Mercurio and Cats and Dogs bring these allegations.
Here, too, however, Cats and Dogs and Mercurio have no
claim that it is independently wrongful for Yelp to post
and arrange actual user reviews on its website as it sees
fit. The business owners may deem the posting or order of
user reviews as a threat of economic harm, but it is not
unlawful for Yelp to post and sequence the reviews. As
Yelp has the right to charge for legitimate advertising
services, the threat of economic harm that Yelp leveraged
is, at most, hard bargaining.

C. Yelp’s Alleged Authoring of Negative Reviews
We next consider whether the business owners have
adequately pled a claim of extortion based on Yelp’s
alleged authoring of negative reviews.
To survive a motion to dismiss for failure to state a claim
after the Supreme Court’s decisions in Ashcroft v. Iqbal,
556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)
and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127
S.Ct. 1955, 167 L.Ed.2d 929 (2007), the business owners’
factual allegations “must ... suggest that the claim has at
least a plausible chance of success.” In re Century
Aluminum, 729 F.3d at 1107. In other words, their
complaint “must allege ‘factual content that allows the
court to draw the reasonable inference that the defendant
is liable for the misconduct alleged.’ “ Id. (quoting Iqbal,
556 U.S. at 678).
[8]

[9]

[10]

Following Iqbal and Twombly, we have
attempted to reconcile the plausibility standard as set out
in those rulings with the more lenient pleading standard
the Court has also, at times, applied. See Eclectic Props.
E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 996
(9th Cir.2014) (citing Swierkiewicz v. Sorema, N.A., 534
U.S. 506, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) and
Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 167
L.Ed.2d 1081 (2007) (per curiam)). While recognizing
some tension among the Court’s pleading-standards cases,
we have settled on a two-step process for evaluating
pleadings:
*10 First, to be entitled to the
presumption of truth, allegations in
a complaint or counterclaim may
not simply recite the elements of a
cause of action, but must contain
sufficient allegations of underlying
facts to give fair notice and to
enable the opposing party to defend
itself effectively. Second, the
factual allegations that are taken as
true must plausibly suggest an

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entitlement to relief, such that it is
not unfair to require the opposing
party to be subjected to the expense
of discovery and continued
litigation.
Id. (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th
Cir.2011)). In all cases, evaluating a complaint’s
plausibility is a “context-specific” endeavor that requires
courts to “draw on ... judicial experience and common
sense.” Id. at 995–96 (internal quotation marks omitted).
Applying this standard, we conclude that the business
owners have not alleged sufficient facts to support their
claim that Yelp authored negative user reviews of the
businesses in question.
Only two business owners allege that Yelp authored
negative reviews of their businesses: Cats and Dogs and
Mercurio. Cats and Dogs’ allegations concern negative
reviews from just two users, Chris R. and Kay K. Cats
and Dogs admits that the Chris R. review corresponds
with an actual client visit, as it complained to Yelp that
the review was posted more than a year after the visit. In
light of this acknowledgment, common sense suggests
that Yelp was not the author of the Chris R. review. So
the allegation that Yelp itself authored negative reviews
must boil down to the two reviews attributed to Kay K.
[11]

The facts alleged in the complaint do not plausibly
establish that Yelp authored the Kay K. review. Yelp is a
forum for consumers to review businesses, and huge
numbers of consumers do just that. For Cats and Dogs to
make a plausible claim that Yelp authored the Kay K.
reviews, it must plead facts tending to demonstrate that
the Kay K. review was not, as is usual, authored by a user.
Cats and Dogs pleads no such facts. In the Second
Amended Complaint, Cats and Dogs suggested that the
Kay K. reviews were authored not by Yelp, but by the
same person who authored the Chris R. posts or by a
person who had vandalized the hospital. And while the
Third Amended Complaint alleges generally that
“approximately 200 Yelp employees or individuals acting
on behalf of Yelp have written reviews of business on
Yelp,” and that Yelp’s CEO admitted in a New York
Times blog post that Yelp has paid users to write reviews,
nothing connects these general allegations to the specific,
negative reviews complained of here.

[12]

Mercurio fares no better. He surmises that because he
has no records of doing the work cited in the review, and
because the names of the users do not match the names of
his customers, Yelp authored the negative reviews. But
even if a particular review was not accurate as to the work

done or the customer’s name, the inaccuracy does not
make it plausible that it was Yelp—as opposed to a
competitor, or a disgruntled customer hiding behind an
alias, or an angry neighbor, just to give a few
possibilities—that authored the offending review.
*11 Accordingly, we agree with the district court that the
Third Amended Complaint does not allege sufficient facts
from which to infer that Yelp authored the negative
reviews of which Cats and Dogs and Mercurio complain.
For these reasons and the reasons explained in Part II.B of
this opinion, we conclude that none of the business
owners have stated a claim of “unlawful” conduct on the
basis of extortion. We therefore affirm the dismissal of
the separate claims of civil extortion and attempted civil
extortion, as well.6

D. The UCL “Unfair” Prong
[13] [14]
“Each prong of the UCL is a separate and distinct
theory of liability,” and so “the ‘unfair’ practices prong
offers [plaintiffs] an independent basis for relief.” Lozano
v. AT & T Wireless Servs., Inc., 504 F.3d 718, 731 (9th
Cir.2007). At least with respect to business-competitor
cases, to state a claim under the UCL’s “unfair” prong the
alleged unfairness must “be tethered to some legislatively
declared policy or proof of some actual or threatened
impact on competition.” Cel–Tech, 20 Cal.4th at 186–87,
83 Cal.Rptr.2d 548, 973 P.2d 527.
The business owners acknowledge that the Cel–Tech
standard applies here. Although this case is not a suit
involving “unfairness to the defendant’s competitors,”
Lozano, 504 F.3d at 735 (emphasis added), as Yelp does
not compete with the business owners, the crux of the
business owners’ complaint is that Yelp’s conduct
unfairly injures their economic interests to the benefit of
other businesses who choose to advertise with Yelp.
[15]

In business-competitor claims, “the word ‘unfair’ ...
means conduct that threatens an incipient violation of an
antitrust law, or violates the policy or spirit of one of
those laws because its effects are comparable to or the
same as a violation of the law, or otherwise significantly
threatens or harms competition.” Cel–Tech, 20 Cal.4th at
187, 83 Cal.Rptr.2d 548, 973 P.2d 527. Under this
standard, the business owners have not stated a claim that
Yelp violated the UCL’s prohibition of unfair business
practices.
The business owners do not allege that Yelp violated any
“legislatively declared policy” other than the prohibitions
on extortion discussed above. For the reasons discussed,

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Levitt v. YelpA Inc., --- F.3d ---- (2014)
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they have not pled facts sufficient to support an inference
of extortion.

state a claim under California’s unfair competition laws,
and fails to sufficiently allege extortion or attempted
extortion.

[16]

As to violations of antitrust principles, the business
owners allege generally that Yelp’s conduct “harms
competition by favoring businesses that submit to Yelp’s
manipulative conduct and purchase advertising to the
detriment of competing businesses that decline to
purchase advertising.” This very general allegation does
not satisfy Cel–Tech’s requirement that the effect of
Yelp’s conduct amounts to a violation of antitrust laws
“or otherwise significantly threatens or harms
competition.” Id.

*12 We emphasize that we are not holding that no cause
of action exists that would cover conduct such as that
alleged, if adequately pled.8 But for all the reasons noted,
extortion is an exceedingly narrow concept as applied to
fundamentally economic behavior. The business owners
have not alleged a legal theory or plausible facts to
support the theories they do argue.
The judgment of the district court is, accordingly,
AFFIRMED.

For these reasons, we conclude that the UCL claim fails
under the “unfair” prong, as well.7
Parallel Citations
14 Cal. Daily Op. Serv. 10,292
III.
The business owners’ Third Amended Complaint fails to
Footnotes
1

Yelp states that the specific benefits of advertising “have changed somewhat over time.” For example, Yelp no longer permits
businesses to highlight a “favorite review” and now offers a “video feature” for advertisers’ Yelp pages.

2

Our holding in Sosa was also influenced by the need to avoid an interpretation of extortion that would impinge on the defendant’s
First Amendment rights. Id. at 940.

3

Although we have noted that California does not have a claim-of-right defense, see Gomez v. Garcia, 81 F.3d 95, 97 (9th
Cir.1996), the state authority we relied on for that conclusion did not involve threats of economic harm, see, e.g., Beggs, 178 Cal.
at 83, 172 P. 152 (threats to accuse a person of a crime); People v. Serrano, 11 Cal.App.4th 1672, 1678, 15 Cal.Rptr.2d 305
(Ct.App.1992) (recovering debt by kidnapping and holding a person for ransom).

4

Chan alleges that she purchased advertising after a Yelp representative told her that Yelp could “tweak” her reviews if she
advertised with Yelp. But Chan does not allege that this pledge was part of her advertising contract with Yelp.

5

By the reference to reputational injuries, the business owners may have meant to invoke trade libel law as the basis for the
wrongfulness element of extortion. But as the business owners have not pled the other elements of trade libel, see Gregory v.
McDonnel Douglas Corp., 17 Cal.3d 596, 600, 131 Cal.Rptr. 641, 552 P.2d 425 (1976); City of Costa Mesa v. D’Alessio Invs.,
LLC, 214 Cal.App.4th 358, 375–76, 154 Cal.Rptr.3d 698 (Ct.App.2013), we do not decide whether a sufficient allegation of trade
libel could supply the wrongfulness element for extortion purposes.

6

We do so without reaching the question of whether California courts recognize a distinct tort of civil extortion.

7

The business owners suggest that the district court should have allowed them to participate in discovery before granting the motion
to dismiss, so that the business owners could have marshaled facts to support their allegations. Because the business owners sought
discovery relating to Yelp’s challenge to their standing, which Yelp does not renew on appeal, and because we affirm the dismissal
based on the Third Amended Complaint’s failure to state a claim, the discovery sought could not have affected our decision.

8

Again, we are not considering whether the CDA would pose a barrier to any such claims.

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End of Document

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