Levitt v. Yelp! Inc.

Filing 51

MOTION to Dismiss FIRST AMENDED CLASS ACTION COMPLAINT AND TO STRIKE CLASS ACTION ALLEGATIONS; MEMORANDUM OF POINTS AND AUTHORITIES filed by Yelp! Inc.. Motion Hearing set for 11/29/2010 02:00 PM in Courtroom 15, 18th Floor, San Francisco. (Beringer, Susan) (Filed on 10/22/2010)

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Levitt v. Yelp! Inc. Doc. 51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP GIBSON, DUNN & CRUTCHER LLP GAIL LEES, SBN 90363 glees@gibsondunn.com 333 South Grand Avenue Los Angeles, California 90071-3197 Telephone: (213) 229-7000 Facsimile: (213) 229-7520 S. ASHLIE BERINGER, SBN 263977 SUSANNAH WRIGHT, SBN 264473 aberinger@gibsondunn.com swright2@gibsondunn.com 1881 Page Mill Road Palo Alto, California 94304-1211 Telephone: (650) 849-5300 Facsimile: (650) 849-5333 YELP! INC. AARON SCHUR, SBN 229566 aschur@yelp.com 706 Mission Street San Francisco, California 94103 Telephone: (415) 908-3801 Facsimile: (415) 908-3833 Attorneys for Defendant YELP! INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION BORIS Y. LEVITT, CATS AND DOGS ANIMAL HOSPITAL, INC., TRACY CHAN, and BLEEDING HEART, LLC d/b/a BLEEDING HEART BAKERY; on behalf of themselves and all others similarly situated, Plaintiff, v. YELP! INC.; and DOES 1 through 100, inclusive, Defendants. Case No. CV 10-01321 MHP Consolidated with CV 10-02351MHP CLASS ACTION DEFENDANT YELP! INC.'S NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED CLASS ACTION COMPLAINT AND TO STRIKE CLASS ACTION ALLEGATIONS; MEMORANDUM OF POINTS AND AUTHORITIES Date: November 29, 2010 Time: 2:00 p.m. Place: Courtroom 15, 18th Floor 450 Golden Gate Avenue San Francisco, California Judge: The Honorable Marilyn H. Patel YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP; CV 10-02351 MHP Dockets.Justia.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP TABLE OF CONTENTS Page NOTICE OF MOTION AND MOTION .............................................................................................. 1 MEMORANDUM OF POINTS AND AUTHORITIES ...................................................................... 1 I. II. III. ISSUES TO BE DECIDED ...................................................................................................... 1 INTRODUCTION AND SUMMARY OF ARGUMENT ....................................................... 2 ALLEGATIONS IN THE COMPLAINT................................................................................. 4 A. Yelp's Online Review Service ...................................................................................... 4 1. Yelp's Automated Review Filter ...................................................................... 4 2. Yelp's Advertising Program ............................................................................. 5 Named Plaintiffs' Allegations....................................................................................... 5 1. Non-Sponsor Plaintiffs:..................................................................................... 5 2. Sponsor Plaintiffs .............................................................................................. 6 3. Plaintoffs Do Not Allege the Core Elements of Their Claims.......................... 7 Class Allegations........................................................................................................... 8 Alleged Claims for Relief ............................................................................................. 8 B. C. D. IV. ARGUMENT ............................................................................................................................ 9 A. Applicable Legal Standard............................................................................................ 9 1. Motion to Dismiss for Lack of Standing Under Rule 12(b)(1)......................... 9 2. Motion to Dismiss Under Rule 12(b)(6) ........................................................... 9 Plaintiffs Lack Standing To Pursue Their Claims ........................................................ 9 1. Plaintiffs Lack Article III Standing................................................................. 10 2. Plaintiffs Also Lack Standing Under the UCL and FAL ................................ 13 Plaintiffs' FAL and UCL Claims Do Not Satisfy the Requirements of Rule 9(b) ..................................................................................................................... 14 1. Rule 9(b) Applies to Plaintiffs' FAL and UCL Claims .................................. 14 2. Plaintiffs Do Not Allege Any Misrepresentation With Particularity ..................................................................................................... 15 3. Plaintiffs Fail to Allege Reliance on Any Statement to Their Detriment ........................................................................................................ 16 4. Plaintiffs Fail to Allege that Yelp Caused Their Purported Injuries ............................................................................................................ 17 B. C. i YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP; CV 10-02351 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP TABLE OF CONTENTS [continued] Page D. Plaintiff Fails To State a Claim Under The UCL........................................................ 17 1. Plaintiffs Have Not Alleged "Fraudulent" Conduct........................................ 18 2. Plaintiffs Have Not Alleged "Unlawful" Conduct.......................................... 18 3. Plaintiffs Have Not Alleged "Unfair" Conduct .............................................. 20 Non-Sponsor Plaintiffs Fail to State a Claim for Intentional Interference with Prospective Business Advantage ........................................................................ 21 1. Plaintiffs Have Not Alleged a Concrete Economic Relationship ................... 21 2. Plaintiffs Have Not Alleged That Yelp Knew Of or Deliberately Interfered With Any Economic Relationship.................................................. 22 Because Plaintiffs Do Not Have Standing and Fail to State a Sufficient Claim, The Class Allegations Also Must Be Dismissed............................................. 23 Plaintiffs Have Not Pleaded Legally Sufficient Class Allegations............................. 23 E. F. G. V. CONCLUSION ....................................................................................................................... 25 ii YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP; CV 10-02351 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP TABLE OF AUTHORITIES Page(s) CASES Arista Records v. Sanchez, No. CV 05-07046, 2006 WL 5908359 (C.D. Cal. Mar. 1, 2006) ............................................ 19 Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) .......................................................................................................... 9, 23 Augustine v. United States, 704 F.2d 1074 (9th Cir. 1983).................................................................................................... 9 Baba v. Hewlett-Packard Co., No. C 09-05946, 2010 WL 2486353 (N.D. Cal. June 16, 2010). ............................................ 21 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ................................................................................................................... 9 Brazil v. Dell Inc., 585 F. Supp. 2d 1158 (N.D. Cal. 2008) ................................................................................... 23 Browne v. Avvo, 525 F. Supp. 2d 1249 (W.D. Wash. 2007)............................................................................... 13 Buena Vista, LLC v. New Res. Bank, No. 10-1502 CW, 2010 WL 3448561 (N.D. Cal. Aug. 31, 2010) ........................................... 20 Buxton v. Eagle Test Sys., Inc., No. C-08-04404, 2010 WL 1240749 (N.D. Cal. Mar. 26, 2010)............................................. 22 Californians for Disability Rights v. Mervyn's, LLC, 39 Cal. 4th 223 (2006) ............................................................................................................... 9 Carafano v. Metrosplash, 339 F.3d 1119 (9th Cir. 2003)............................................................................................ 12, 13 Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999) ............................................................................................................. 21 Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824 (2006) .................................................................................................. 17 Dodd-Owens v. Kyphon, No. C06-3988, 2008 WL 410241 (N.D. Cal. Feb. 12, 2008)................................................... 24 Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350 (2010) ................................................................................................ 19 Gardner v. Martino, 563 F.3d 981 (9th Cir. 2009).................................................................................................... 13 Goddard v. Google, Inc., 640 F. Supp. 2d 1193 (N.D. Cal. 2009) ................................................................................... 13 iii YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP; CV 10-02351 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP TABLE OF AUTHORITIES [continued] Page(s) Gutierrez v. Wells Fargo & Co., No. C 07-05923, 2009 WL 1246689 (N.D. Cal. May 5, 2009) ......................................... 14, 25 Halton Co. v. Streivor, Inc., No. 10-cv-00655, 2010 WL 2077203 (N.D. Cal. May 21, 2010)...................................... 15, 17 Hovsepian v. Apple, Inc., No. 08-5788, 2009 WL 5069144 (N.D. Cal. Dec. 17, 2009).................................................. 24 In re Actimmune Mktg. Litig., No. C 08-02376 MHP, 2009 WL 3740648 (N.D. Cal. Nov. 6, 2009) ............. 14, 17, 18, 19, 20 In re Actimmune Mktg. Litig., 614 F. Supp. 2d 1037 (N.D. Cal. 2009) ................................................................................... 16 In re Calpine Corp. ERISA Litig., No. C 03-1685 SBA, 2005 WL 3288469 (N.D. Cal. Dec. 5, 2008) ........................................ 14 In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541 (9th Cir. 1994).................................................................................................... 15 In re Stac Elecs. Sec. Litig., 89 F.3d 1399 (9th Cir. 1996)................................................................................................ 9, 23 In re Tobacco II Cases, 46 Cal. 4th 298 (2009) ....................................................................................................... 13, 16 In re Wright, 65 Cal. 2d 650 (1967) .............................................................................................................. 19 Johnson v. Weinberger, 851 F.2d 233 (9th Cir. 1988).................................................................................................... 10 Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009)............................................................................................ 14, 18 Laster v. T-Mobile USA, Inc., 407 F. Supp. 2d 1181 (S.D. Cal. 2005) .............................................................................. 14, 17 Lee v. Capital One Bank, No. C 07-4599, 2008 WL 648177 (N.D. Cal. Mar. 5, 2008) ................................................... 11 Leeper v. Beltrami, 53 Cal. 2d 195 (1959) .............................................................................................................. 18 Leong v. Square Enix of Am. Holdings, Inc., CV 09-4484, 2010 WL 1641364 (C.D. Cal. Apr. 20, 2010).................................................... 20 Lierboe v. State Farm Mut. Auto. Ins. Co., 350 F.3d 1018 (9th Cir. 2003).................................................................................................. 23 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) ....................................................................................................... 9, 10, 11 Marcelos v. Dominguez, No. C 08-00056, 2008 WL 1820683 (N.D. Cal. Apr. 21, 2008) ............................................. 19 iv YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP; CV 10-02351 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP TABLE OF AUTHORITIES [continued] Page(s) Mazur v. eBay Inc., No. C 07-03967, 2008 WL 618988 (N.D. Cal. Mar. 4, 2008) ................................................ 12 McDonald v. Coldwell Banker, 543 F.3d 498 (9th Cir. 2008).................................................................................................... 20 Mitchell v. Sharon, 59 F. 980 (9th Cir. 1894).......................................................................................................... 18 Moss v. U.S. Secret Serv., 572 F.3d 962 (9th Cir. 2009).................................................................................................... 23 Nagel v. Twin Labs., Inc., 134 Cal. Rptr. 2d 420 (Ct. App. 2003)..................................................................................... 15 New.Net, Inc. v. Lavasoft, 356 F. Supp. 2d 1090 (C.D. Cal. 2004) ................................................................................... 23 O'Shea v. Littleton, 414 U.S. 488 (1974) ................................................................................................................. 23 Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118 (1990) ............................................................................................................ 22 People v. Anderson, 75 Cal. App. 365 (1925), disapproved of on other grounds .................................................... 19 People v. Goodman, 159 Cal. App. 2d 54 (1958)................................................................................................ 18, 19 Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530 (9th Cir. 1984)...................................................................................................... 9 Sanders v. Apple, Inc., 672 F. Supp. 2d 978 (N.D. Cal. 2009) ........................................................................... 9, 11, 12 Sigmond v. Brown, 645 F. Supp. 243 (C.D. Cal. 1986)........................................................................................... 19 Silicon Knights, Inc. v. Crystal Dynamics, Inc., 983 F. Supp. 1303 (N.D. Cal. 1997) ........................................................................................ 22 Smith & Hawken, Ltd. v. Gardendance, Inc., No. C04-1664, 2004 WL 2496163 (N.D. Cal. Nov. 5, 2004).................................................. 21 Smith v. Nat'l City Bank of Ind., No. C 09-5715, 2010 WL 1729392 (N.D. Cal. Apr. 27, 2010) .............................................. 16 Sound Appraisal v. Wells Fargo Bank, N.A., No. C 09-01630, 2009 WL 3353057 (N.D. Cal. Oct. 15, 2009).............................................. 22 Stearns v. Select Comfort Retail Corp., No. 08-cv-02746, 2009 WL 4723366 (N.D. Cal. Dec. 4, 2009)........................................ 23, 25 Two Jinn, Inc. v. Government Payment Service, Inc., No. 09CV2701, 2010 WL 1329077 (S.D. Cal. Apr. 1, 2010) ..................................... 10, 11, 12 v YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP; CV 10-02351 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP TABLE OF AUTHORITIES [continued] Page(s) United States v. Ritchie, 342 F.3d 903 (9th Cir. 2003)...................................................................................................... 4 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003)............................................................................................ 14, 15 Vinole v. Countrywide Home Loans, Inc., 246 F.R.D. 637 (S.D. Cal. 2007).............................................................................................. 25 STATUTES 47 U.S.C. 230(c) ........................................................................................................................... 3, 12 Cal. Bus. & Prof. Code 17200 et seq. ("UCL") ......................................................................... passim Cal. Bus. & Prof. Code 17500 et seq. ("FAL").......................................................................... passim Cal. Penal Code 518.......................................................................................................................... 18 vi YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP; CV 10-02351 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED CLASS ACTION COMPLAINT AND TO STRIKE CLASS ACTION ALLEGATIONS TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that at 2:00 p.m. on November 29, 2010, or as soon thereafter as the matter may be heard by the above-entitled Court, in the courtroom of the Honorable Marilyn H. Patel, 450 Golden Gate Avenue, San Francisco, California 94102, Defendant Yelp!, Inc. ("Yelp") will and hereby does move for an order dismissing Plaintiffs' First Amended Class Action Complaint ("FAC" or "Amended Complaint") for violations of California Business and Professions Code Section 17200 et seq. the "Unfair Competition Law" or "UCL") and Section 17500 et seq. (the "False Advertising Law" or "FAL"), and for "Intentional Interference with Prospective Business Advantage" under Rules 12(b)(1), 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure. Yelp also moves to strike the class action allegations in the Amended Complaint under Rule 12(f) of the Federal Rules of Civil Procedure. This motion is based on this Notice of Motion and Motion, the Memorandum of Points and Authorities, the Court's files in this action, the arguments of counsel, and any other matter that the Court may properly consider. MEMORANDUM OF POINTS AND AUTHORITIES I. 1. ISSUES TO BE DECIDED Do Plaintiffs lack standing under Article III of the United States Constitution and the California Unfair Competition and False Advertising Laws? 2. Do Plaintiffs plead their claims against Yelp with the level of specificity required by Rule 9(b) of the Federal Rules of Civil Procedure? 3. Do Plaintiffs state a legally sufficient claim against Yelp for violations of the UCL or FAL or for Intentional Interference with Prospective Business Advantage? 4. Should Plaintiffs' class allegations be stricken pursuant to Federal Rule of Civil Procedure 12(f) because they failed to plead an ascertainable or manageable class as required by Rule 23 of the Federal Rules of Civil Procedure and because Plaintiffs have failed to allege specific commonality and typicality among the proposed class members? 1 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP II. INTRODUCTION AND SUMMARY OF ARGUMENT Plaintiffs seek to suppress legitimate and protected online consumer commentary about their businesses. Yelp is a leading Internet review service that allows members of the public to read and write online about their experiences with local businesses. The integrity of these consumer reviews has fueled the success of Yelp's service, and Yelp goes to great lengths to combat efforts by some businesses (including some of the Plaintiffs here) to post fake reviews. As Plaintiffs acknowledge, Yelp employs a proprietary automated algorithm to filter less reliable reviews from its website, regardless of whether those reviews are written about businesses that advertise with Yelp. Although Yelp strives to provide a fair and neutral service for consumers, Plaintiffs complain that they were harmed by negative user reviews posted on Yelp.com, or that positive reviews were removed as unreliable by Yelp's automated filter. But Plaintiffs conspicuously fail to allege a coherent or actionable theory that Yelp is in any way responsible for their speculative injuries. Indeed, Plaintiffs contend that they were injured by reviews whether or not they advertised on Yelp, defeating their suggestion that Yelp somehow manipulates reviews in favor of advertisers. Plaintiffs also fail to link any alleged harm to any purported deception or other misconduct by Yelp. Unable to suppress public discussion about their businesses online or succeed in their efforts to post fake reviews on Yelp's service, Plaintiffs filed this lawsuit, asserting contrived and deficient claims for violation of California's Unfair Competition and False Advertising Laws and claims for intentional interference with prospective business advantage, on behalf of a putative class of business owners. For numerous independent reasons, Plaintiffs do not state a legally sufficient cause of action. As a threshold matter, Plaintiffs fail to meet the most basic requirements to establish standing under Article III of the United States Constitution, California's Unfair Competition Law ("UCL"), or California's False Advertising Law ("FAL"). Plaintiffs do not allege any particularized "injury-infact," but instead rely on vague and unsupported claims of "lost business" that are insufficient to satisfy standing requirements under Article III. Likewise, Plaintiffs fail to allege that this unspecified "harm" was in any way caused by any deceptive or wrongful conduct by Yelp, as required. Nor can they, since three Plaintiffs concede that they declined to advertise in response to offers from Yelp, 2 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP while the fourth admits that any harm was due solely to negative reviews posted by consumers after it purchased advertising. Plaintiffs' claims under the FAL and UCL also fail because Plaintiffs do not point to a single statement that Yelp made to them that they allege is false, much less with the specificity required under Federal Rule of Civil Procedure 9(b). Likewise, Plaintiffs do not (and cannot) allege that they relied on any statement to their detriment, particularly given that three of the four Plaintiffs declined to purchase advertising in response to offers from Yelp. Plaintiffs' claim under the UCL, which arises from the same deficient allegations, fails for the additional reason that Plaintiffs do not allege any conduct that is "unlawful" or "unfair." Although Plaintiffs make conclusory claims that Yelp engaged in extortion, they do not plead a single instance where Yelp threatened or coerced any business to advertise, elements required for any claim of extortion. To the contrary, Plaintiffs concede that in response to calls from Yelp, they either declined to advertise at all or were motivated to advertise "based on promises" not threats. Finally, the Non-Sponsor Plaintiffs do not state a claim for intentional interference with prospective business advantage because they do not identify a single relationship that Yelp allegedly disrupted (much less intentionally), and they likewise do not allege that Yelp knew of a third party relationship involving the Non-Sponsor Plaintiffs. At bottom, Plaintiffs' claims are nothing more than vague complaints about the content of negative reviews posted by consumers on Yelp.com, and Yelp's use of an automated filter to ensure that reviews published on its website are reliable. It is well-settled that Yelp is immune from such claims under Section 230 of the Communications Decency Act, 47 U.S.C. 230(c), which protects online service providers like Yelp from claims arising from publishing or editing user content online. Even at the pleading stage, it also is apparent that Plaintiffs cannot possibly or adequately pursue their claims on behalf of a putative class of businesses that were contacted by Yelp about advertising. The proposed class definition is hopelessly overbroad and would encompass hundreds of thousands of businesses, whether or not Yelp engaged in any fraud, extortion or other misconduct in communications with those businesses. And, any attempt to assess what occurred in hundreds of thousands of individual discussions with such businesses much less to assess reliance and harm 3 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP would be nothing short of impossible. Because the alleged class definition is fatally deficient and because Plaintiffs cannot plausibly represent or certify a class on such fact-intensive claims as asserted here under any class definition this Court also should strike the class allegations at the pleading stage. III. A. ALLEGATIONS IN THE COMPLAINT1 Yelp's Online Review Service Yelp publishes a popular website at www.yelp.com, which allows consumers to read and write reviews about local businesses online. FAC 2, 21-22. As Plaintiffs admit, the reviews on Yelp's website are written by consumers, who rate local businesses on a scale of one to five stars. Id. 2, 22-23. As explained on portions of Yelp's website referenced in the Amended Complaint,2 well over 12 million reviews have been posted to Yelp's website, and the overwhelming majority of these reviews are positive approximately 85% of reviews are 3 stars or higher, whether or not the business advertises on Yelp. See Exhibit 1 to Declaration of Ashlie Beringer ("Beringer Decl.") (referenced in 2-4 of the Am. Comp.). 1. Yelp's Automated Review Filter As Plaintiffs concede, Yelp discloses on its website that it "has an automated filter that suppresses a small portion of reviews it targets those suspicious ones you see on other sites." FAC 4. The review filter is critical to ensuring that consumers see the most reliable reviews, rather than those that might have been written by a business owner hoping to promote his or her own business or to tarnish a competitor. See id. 5; Beringer Decl. Ex. 2 (cited in 3, 5, and 26 of the Am. Comp.). The filter does not take into account whether or not a business advertises with Yelp, and instead, filters reviews based on, among other things, an analysis of "how established a particular reviewer is." Id. As Yelp discloses on its website (in disclosures referenced in the Amended Complaint), 1 The following allegations contained in the Amended Complaint are deemed to be true solely for purposes of this motion. Yelp vigorously denies that it engaged in any misconduct, and if this case were to proceed past the pleading stage, Yelp would demonstrate that Plaintiffs' allegations are entirely false. Yelp.com, the Court may consider the complete contents of these statements when assessing Plaintiffs' allegations. See, e.g., United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 4 2 Because the Amended Complaint specifically references and relies upon disclosures contained on YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP because a reviewer's activities and "trustworthiness" can vary over time, "reviews can disappear and reappear over time" based on the reviewer's involvement in Yelp. Id. 2. Yelp's Advertising Program Yelp also provides businesses with an opportunity to advertise on Yelp.com. See Beringer Decl. Ex. 3. Advertising businesses are able to "enhance [their] business page" with a photo slideshow, and to prevent competitors' advertisements from appearing on their business pages. Id. In addition, advertisers are given priority in general searches on Yelp.com, and advertisements appear as sponsored results at the top of Yelp search results and on related business pages. Id.3 B. Named Plaintiffs' Allegations 1. Non-Sponsor Plaintiffs: (a) Boris Levitt Boris Levitt complains that positive reviews were removed from his business page before and after he received an offer to purchase advertising on Yelp. Levitt alleges that he contacted Yelp to "inquire about why a positive review of his business had disappeared." FAC 42-45. Levitt concedes that he repeatedly was informed correctly that Yelp uses an "automated system that decides how much trust to instill in a particular reviewer" and that may remove or reinstate reviews, but that Yelp employees "don't have the ability to evaluate or reinstate specific reviews" that are filtered. Id. 43, 45. Levitt then alleges that he was contacted a few months later by a Yelp sales representative, who suggested that Levitt could increase his "page views" by advertising on Yelp. Id. 47. "[I]n response," Levitt declined to advertise because he already had a "high volume of users reviewing his business page" and a "rating of 4.5 stars" and not because of any statement by Yelp. Id. Levitt contends that after he declined to advertise on Yelp, additional 5-star reviews were 3 Although Yelp previously offered advertisers the option to select a single "Favorite Review" (clearly labeled as such) to display prominently on the business's review page (as referenced in paragraph 4 of the Amended Complaint), it has since discontinued this program. 5 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP removed from his business page conditions that also existed before he spoke with Yelp. Id. 4245, 49, 51. He vaguely complains that "since then," his "business revenues" have declined, although he fails to identify a single customer he lost due to any alleged conduct by Yelp (or otherwise). Id. (b) Cats & Dogs In contrast to Levitt, Cats and Dogs ("C&D") focuses on negative consumer reviews it received, before receiving an offer to advertise on Yelp. FAC 53. Specifically, C&D alleges that it first contacted Yelp in September 2009 to request removal of a negative review about C&D alleged to be "defamatory" and "possibl[y] fals[e]". Id. 53-54. Thereafter, the review was removed (although C&D does not allege by whom whether the user or Yelp or allege facts suggesting that this was due to anything other than the normal operation of the review filter). Id. 54. C&D then claims that four months later it received a sales call from "Kevin," who allegedly offered various benefits if C&D advertised on Yelp, including the ability to "hide negative reviews" or "place them lower on the listing page." Id. 57. C&D "declined the offer, saying that [it] wanted to track referrals from Yelp for three months without ads." Id. 58. C&D contends after it declined to advertise with Yelp, negative and "highly . . . inflammatory" reviews continued to appear on its business page, just as they had before, but that Yelp was unwilling to remove these reviews consistent with its stated policies. Id. 59-62. Significantly, C&D concedes that after declining to advertise with Yelp, it nevertheless "enjoyed a 4-star rating" on Yelp, with more than 60% of reviews giving it "a perfect 5-star rating." Id. 63. C&D then concludes, with no supporting facts, that it somehow was "damaged" through "lost patronage and prospective business." Id. 65. 2. Sponsor Plaintiffs (a) Tracy Chan Tracy Chan alleges that a Yelp representative called to "offer her lots of benefits" if she advertised, such as "the opportunity" to "hid[e] or bury[] bad reviews" and to "put pictures on the Yelp page." FAC 69. Despite these purported offers, Chan concedes that she "ultimately declined to purchase Yelp advertising" in response. Id. 72. Chan complains that, thereafter, various "5-star reviews" were removed from Chan's business page although she fails to allege that such removals 6 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP were due to anything other than the normal operation of the review filter. Id. 73. Several "months" after Chan declined the offer to advertise, she signed up for advertising on Yelp, due to an alleged "decline in new patients" and not due to any statement or alleged threat by Yelp. Id. 74. Just three months later, Chan cancelled her advertising contract, even though she alleges that her star rating "increased" while she was an advertiser. Id. 75. Chan complains that some time after she stopped advertising on Yelp, several positive reviews were removed from her business page but again, fails to allege that this was due to factors other than the normal operation of the review filter. Id. 76-77. Chan contends that her business "experienced a decline in new patients" after she stopped advertising with Yelp, although she alleges no facts that in any way suggest that this unspecified "decline" was caused by any misrepresentation, threat or other wrongful conduct by Yelp. Id. 78. (b) Bleeding Heart Bakery Bleeding Heart Bakery ("BHB") contends that it purchased advertising on Yelp "based on . . . promises" supposedly made by Yelp representatives, inter alia, to "push bad reviews to the very end of [its business] page[]" and to remove certain "bogus" reviews. FAC 82, 85. In contrast to Chan (whose business's star ratings allegedly "increased" after advertising on Yelp), BHB complains that consumers posted several negative reviews about its business after it purchased advertising on Yelp, while claiming that some positive reviews disappeared from its business page allegations that defeat any suggestion that Yelp manipulates reviews in favor of advertisers. Id. 87. BHB also fails to allege that these reviews "disappeared" through any mechanism other than Yelp's review filter. BHB asserts that its sales declined not as a result of any misrepresentation or wrongful conduct by Yelp but "as a result of . . . negative reviews" posted by these users. Id. 89. 3. Plaintiffs Do Not Allege The Core Elements of Their Claims Although the named Plaintiffs make wildly disparate claims concerning the statements allegedly made by Yelp and their resulting actions and "injuries," they conspicuously fail to plead any of the basic facts necessary to support their claims here (much less to do so with the required specificity). Indeed: 7 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP No Plaintiff alleges that any statement made by Yelp was false or misleading, or in any way alleges how any statement was deceptive. No Plaintiff alleges that Yelp threatened or even implied that it would subject Plaintiffs to harm if they did not advertise on Yelp. No Plaintiff alleges that it relied in any way on any misrepresentation or threat by Yelp. To the contrary, three of the Plaintiffs concede that they declined to purchase advertising in response to Yelp's offers, and the fourth (BHB) fails to allege that any alleged "promises" by Yelp were false or threatening. All Plaintiffs allege generalized "harm" to their business in the most speculative terms, and no Plaintiff identifies a single customer relationship that was disrupted. C. Class Allegations Plaintiffs purport to assert claims individually and on behalf of all "businesses and persons . . . who were in contact with Yelp regarding the option to advertise on Yelp . . . and who were subsequently subject to the manipulation of the reviews of their businesses." FAC 95(a) & (b). The proposed class is divided into two subclasses: "Non-Sponsors" consist of businesses that "declined to purchase advertising," while "Sponsors" consist of businesses that "advertis[ed]." Id. Notably, the proposed class definition encompasses all "businesses and persons" who "were in contact with Yelp" about advertising, whether or not Yelp purportedly engaged in any deceptive, threatening or other wrongful conduct during those communications. Likewise, the class purports to include businesses and persons that were "subject to the manipulation of reviews," whether or not such supposed "manipulation" resulted from the normal operation of Yelp's automated review filter, and irrespective of whether such businesses were harmed or flourished as a result. D. Alleged Claims for Relief Based on these confusing and contradictory allegations, Plaintiffs assert claims for violations of the UCL, Cal. Bus. & Prof. Code 17200 et seq., and FAL, Cal. Bus. & Prof. Code 17500, individually and on behalf of the proposed subclasses. In addition, the Non-Sponsor Plaintiffs purport to assert a claim for intentional interference with prospective business advantage. 8 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP IV. A. Applicable Legal Standard 1. ARGUMENT Motion to Dismiss for Lack of Standing Under Rule 12(b)(1) A challenge to standing under Article III "pertain[s] to a federal court's subject-matter jurisdiction" and is therefore "properly raised in a motion under Federal Rule of Civil Procedure 12(b)(1)." Sanders v. Apple, Inc., 672 F. Supp. 2d 978, 983-84 (N.D. Cal. 2009). On a motion to dismiss for lack of standing, "[n]o presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). 2. Motion to Dismiss Under Rule 12(b)(6) A complaint should be dismissed under Federal Rule of Civil Procedure 12(b)(6) when it lacks sufficient facts to support a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984). Although this Court must accept a plaintiff's allegations as true and construe them in a light most favorable to the plaintiff, "[c]onclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir. 1996). To avoid dismissal, a complaint must do more than "plead[] facts that are `merely consistent with' a defendant's liability," and, instead, a plaintiff must set forth enough factual information to make it "plausible," not merely "possible," that the defendant is liable. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). B. Plaintiffs Lack Standing To Pursue Their Claims As a threshold matter, Plaintiffs have failed to plead facts sufficient to establish that they satisfy "the irreducible constitutional minimum of standing" under Article III, as required to pursue their claims in this Court. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Plaintiffs also do not meet the statutory standing requirements applicable to their claims under the UCL and FAL. See Californians for Disability Rights v. Mervyn's, LLC, 39 Cal. 4th 223, 227-29 (2006). Because Plaintiffs fail to make plausible allegations that they suffered a non-speculative injury in fact, or that 9 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP Yelp's alleged conduct caused any purported "injury", Plaintiffs lack standing under either Article III or the UCL, and their Amended Complaint must be dismissed. 1. Plaintiffs Lack Article III Standing To establish Article III standing, Plaintiffs must allege that (1) they "have suffered an `injury in fact' an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual and imminent, not conjectural or hypothetical"; (2) there is "a causal connection between the injury and the conduct complained of;" and (3) it is "likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Lujan, 504 U.S. at 560-61. A plaintiff does not demonstrate standing "[w]hen speculative inferences are necessary . . . to establish either injury or the connection between the alleged injury and the act challenged." Johnson v. Weinberger, 851 F.2d 233, 235 (9th Cir. 1988) (affirming dismissal of plaintiff's complaint for lack of standing because the alleged injury was "hypothetical" and "at best, speculative."). (a) Plaintiffs Fail to Sufficiently Allege an Injury In Fact Plaintiffs assert in conclusory terms that they have suffered injury in the form of unspecified "lost revenues." FAC 112, 114, 122, 124, 131.4 Tellingly, Plaintiffs do not point to a single lost customer, and they provide no details or factual support for their speculative claims. Instead, Plaintiffs rely on vague and unsupported assertions of lost business, alleging, for example, that C&D "lost patronage and prospective business" after declining to advertise on Yelp, while Chan "experienced a decline in new patients" at some unspecified time. See id. 65, 74, 78; see also id. 49 (alleging that Levitt's "business revenues experienced a decline"); id. 89 (alleging BHB's "business suffered"). Courts have dismissed claims for lack of Article III standing including UCL claims in precisely these circumstances. Most recently, in Two Jinn, Inc. v. Gov't Payment Serv., Inc., No. 09CV2701, 2010 WL 1329077 (S.D. Cal. Apr. 1, 2010), the court found that such speculative and non-concrete allegations of "lost business" do not establish an "injury in fact" for purposes of Article III standing. In Two Jinn, the plaintiff asserted UCL claims, alleging that it lost customers, causing it 4 To the extent Sponsor Plaintiffs allege that their injuries consist of advertising payments to Yelp, these allegations fail for lack of causation. See infra, pp. 11-13. 10 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP to "lose the financial benefits of sales they would have made but for [defendant's] illegal activities." Id. at *2. The court dismissed the plaintiff's claims for lack of Article III standing, finding that the plaintiff failed to allege an "injury in fact." Id. at *3. Specifically, the court concluded: This alleged "injury" is mere conjecture, and is certainly not concrete or particularized. Plaintiff has not, and likely could not, point to any potential customers who would have purchased bail from sources other than Defendant, much less Plaintiff. Id. As in Two Jinn, Plaintiffs cannot point to a single "potential customer[] who would have purchased" products or services but for Yelp's alleged conduct, and their claims of "lost revenues" are based entirely on impermissible conjecture. Id. Such speculative claims of injury are wholly insufficient to establish Article III standing. See also Sanders, 672 F. Supp. 2d at 984 (dismissing claim for lack of Article III standing where "speculative inferences are necessary to establish either injury or the connection between the alleged injury and the act challenged"); Lee v. Capital One Bank, No. C 07-4599, 2008 WL 648177, at *3 (N.D. Cal. Mar. 5, 2008) (Patel, J.) (dismissing complaint for lack of Article III standing where injury was "hypothetical" and not "actual or imminent"). (b) Plaintiffs Have Not Alleged a Causal Connection Likewise, Plaintiffs cannot establish standing because they do not allege any nexus between their purported "injuries" and any alleged misstatement or misconduct by Yelp. Lujan, 504 U.S. at 560-61 (Article III standing requires alleged injuries to be "fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court."). Non-Sponsor Plaintiffs Non-Sponsor Plaintiffs fail to allege any facts creating a plausible inference that the alleged "decline" in their business was caused by any deception or other misconduct by Yelp. Indeed, Levitt asserts merely that his "business revenues experienced a decline" sometime after he declined to purchase advertising from Yelp, but does not allege, as he must, that this unspecified "decline" resulted from any misconduct by Yelp, as opposed to customer dissatisfaction, economic conditions, or a multitude of other possible factors. FAC 49. Likewise, C&D fails to allege how (or whether) 11 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP any misconduct by Yelp caused any "lost patronage and prospective business," and instead complains that negative user reviews appeared on its business page after it declined to advertise. FAC 59-65. At most, Non-Sponsor Plaintiffs appear to allege that they experienced an unspecified decline in business that somehow was connected to the content of user reviews. It is well-settled, however, that Yelp is immune from claims arising from the content of user reviews on its service under the Communications Decency Act ("CDA"), 47 U.S.C. 230(c), or from any editorial functions (including the use of an automated review filter) that Yelp exercises in publishing such reviews. See, e.g., Carafano v. Metrosplash, 339 F.3d 1119, 1123 (9th Cir. 2003); Mazur v. eBay Inc., No. C 0703967, 2008 WL 618988, at *9 (N.D. Cal. Mar. 4, 2008) (Patel, J.) ("Screening a potential auction house . . . is akin to deciding whether to publish and therefore eBay is immune under section 230 for its screening decisions."). Because the Non-Sponsor Plaintiffs fail to allege any causal connection between their purported injuries and any actionable conduct by Yelp, they cannot demonstrate Article III standing. See Sanders, 672 F. Supp. 2d at 984 (dismissing complaint for lack of causal nexus between alleged misconduct and injury); Two Jinn, 2010 WL 1329077, at *3 (complaint dismissed where "there is no direct connection between Defendant's activities and Plaintiff's business"). Sponsor Plaintiffs Sponsor Plaintiffs also fail to allege any plausible nexus between their claims of "lost business" and any misconduct by Yelp. Like the Non-Sponsor Plaintiffs, Chan and BHB fail to allege (as required) that any "decline" in customers was due to any misconduct by Yelp. In fact, BHB asserts that its business suffered directly "as a result of . . . negative reviews" posted by users content for which Yelp is immune as a matter of law. FAC 88-89. See infra p. 13. In addition to speculative claims of "lost business," Sponsor Plaintiffs make vague claims that they somehow suffered injury in the form of "payments made to Defendants for advertising." See, e.g., FAC 114. But the Sponsor Plaintiffs fail to connect these payments to any misrepresentation or misconduct by Yelp. In fact, Chan concedes that she declined to purchase advertising after her conversations with Yelp. Id. 72. Likewise, BHB concedes that it purchased advertising based on supposed "promises" of benefits and not due to any threat or coercion but fails to allege facts 12 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP suggesting that these purported promises were false. Id. 82-85. Because the Sponsor Plaintiffs do not allege any causal nexus between their payment of advertising fees and any fraudulent or wrongful conduct by Yelp, their claims must be dismissed for lack of standing. See supra pp. 11-12. (c) Plaintiffs Do Not Allege A Redressable Injury Finally, Plaintiffs do not and cannot allege facts establishing that their purported injuries are capable of being redressed by a favorable decision. At most, Plaintiffs' claims of lost business stem from the content of reviews posted by consumers who are not before this Court. No decision in this case can (or should) bar public discussion about Plaintiffs' services on Yelp or any other public forum, and such speech is squarely protected by the First Amendment. See Gardner v. Martino, 563 F.3d 981, 992 (9th Cir. 2009) (statement by talk show host that plaintiff's business "sucks" was "nonactionable opinion protected by the First Amendment"); Browne v. Avvo, Inc., 525 F. Supp. 2d 1249, 1251 (W.D. Wash. 2007) (opinions expressed through defendant's website, which ranked attorneys by numerical score, were "absolutely protected by the First Amendment"). Precisely to ensure such an open forum for discussion on the Internet, Plaintiffs also are barred under CDA Section 230 from pursuing claims against Yelp arising from its Internet service or its screening of reviews for publication through the use of an automated filter. See, e.g., Carafano, 339 F.3d at 1122-25 (affirming dismissal of claim for negligently posting third party content because claim was barred by CDA Section 230); Goddard v. Google, Inc., 640 F. Supp. 2d 1193, 1201-02 (N.D. Cal. 2009) (dismissing UCL claims because Google was immune under the CDA for publishing third-party advertising content). Because Plaintiffs cannot allege that their injuries are likely to be (or even can be) redressed by a favorable decision, they lack standing under Article III. 2. Plaintiffs Also Lack Standing Under the UCL and FAL Plaintiffs also lack standing under the UCL and FAL because they fail to allege that they relied to their detriment on any allegedly deceptive or wrongful statement by Yelp. As the Supreme Court of California has held, a "plaintiff must plead and prove actual reliance to satisfy the standing requirement of [the UCL]," such that a plaintiff must demonstrate that defendant's misrepresentation was "an immediate cause" of the plaintiff's injury. In re Tobacco II Cases, 46 Cal. 4th 298, 326-28 (2009). As discussed previously, however, Plaintiffs do not allege facts that remotely tie their 13 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP claimed injuries to any deception or misconduct by Yelp, much less plead reliance on any misconduct. See supra pp. 11-13. For this independent reason, Plaintiffs' UCL and FAL claims must be dismissed for lack of standing. See Gutierrez v. Wells Fargo & Co., No. C 07-05923, 2009 WL 1246689, at *4 (N.D. Cal. May 5, 2009) (plaintiff did "not read or in any way rel[y] on any challenged statement" and therefore could not "establish that he entered into any transactions as a result"); Laster v. T-Mobile USA, Inc., 407 F. Supp. 2d 1181, 1194 (S.D. Cal. 2005) (no causation where "none of the named Plaintiffs allege[d] that they saw, read, or in any way relied on the advertisements [or that] they entered into any transaction as a result of those advertisements"). C. Plaintiffs' FAL and UCL Claims Do Not Satisfy the Requirements of Rule 9(b) Even if Plaintiffs could demonstrate standing and they cannot their FAL and UCL claims still fail because they do not come close to satisfying the stringent requirements for pleading fraud or false advertising under Federal Rule of Civil Procedure 9(b). 1. Rule 9(b) Applies to Plaintiffs' FAL and UCL Claims The Ninth Circuit repeatedly has held that Rule 9(b)'s heightened pleading standards apply to claims for violations of the FAL, as well as UCL claims that arise from allegedly false or deceptive statements. See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102-05 (9th Cir. 2003) (FAL and UCL claims based upon false statements and misrepresentations must satisfy Rule 9(b)); see also In re Actimmune Mktg. Litig., No. C 08-02376 MHP, 2009 WL 3740648, at *8-9 (N.D. Cal. Nov. 6, 2009) (Patel, J.) ("[P]laintiffs' claims under the fraudulent prong of the UCL which are predicated entirely on misstatements made by defendants unmistakably `sound in fraud' and thus must be pled with specificity."). Moreover, Rule 9(b) applies "to all averments of fraud, regardless of whether fraud is an essential element of the underlying cause of action." In re Calpine Corp. ERISA Litig., No. C 031685 SBA, 2005 WL 3288469, at *6 (N.D. Cal. Dec. 5, 2005) (citing Vess, 317 F.3d at 1103-05, 1108) (emphasis in original). "Fraud can be averred by specifically alleging fraud, or by alleging facts that necessarily constitute fraud (even if the word `fraud' is not used)." Vess, 317 F.3d at 1105. Plaintiffs repeatedly assert that Yelp "made deceptive statements and misrepresentations to business owners" an essential element of their FAL claim. See, e.g., FAC 106, 121, 123; see 14 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP Nagel v. Twin Labs., Inc., 134 Cal. Rptr. 2d 420, 429 (Ct. App. 2003). Moreover, Plaintiffs vaguely allege that Yelp's overarching goal is to induce businesses to purchase advertising through such purportedly "deceptive" advertising practices. FAC 106, 121. Plaintiffs further assert (albeit in conclusory terms) that they relied upon such unspecified misrepresentations when "either purchas[ing] or declin[ing] to purchase advertising from Yelp," and suffered "injury" as a result. FAC 107, 114, 122. These allegations, while vague and deficient, clearly attempt to plead the "indispensable elements of a fraud claim" misrepresentation, an intent to deceive, reliance, and resulting damages. Vess, 317 F.3d at 1105. As such, Plaintiffs' claims are plainly grounded in fraud and must satisfy the particularity requirements of Rule 9(b). See id. at 1103-04. 2. Plaintiffs Do Not Allege Any Misrepresentation With Particularity To state a claim under the FAL or the UCL based upon allegedly deceptive statements or misrepresentations, a plaintiff must identify a specific statement alleged to be false, deceptive, or misleading at the time it was made. Nagel, 134 Cal. Rptr. 2d at 429; Halton Co. v. Streivor, Inc., No. C10-00655, 2010 WL 2077203, at *4 (N.D. Cal. May 21, 2010) (dismissing UCL claim where plaintiff's "complaint failed to allege that [defendant's] representations were actually false"). Moreover, under Rule 9(b), a plaintiff must specifically "set forth what is false or misleading about the statement, and why it is false." Vess, 317 F.3d at 1106 (quoting In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (emphasis added)). Contrary to these requirements, Plaintiffs fail to identify a single specific statement or representation alleged to be false, much less explain or allege plausible facts demonstrating why any statement was false. If anything, Plaintiffs allegations (if accepted as true) suggest that the statements allegedly made to Plaintiffs by Yelp were accurate. For example: Levitt alleges that he was informed that Yelp uses "an automated system" that assesses the trustworthiness of particular reviews and that "may not display" reviews that Yelp's "software" detects to be untrustworthy. FAC 43. These statements are entirely consistent with Levitt's core complaint that several positive reviews were thereafter removed from his business page and with the admitted disclosures about the review filter contained on Yelp.com. Id. 4-5, 49, 51. Likewise, Chan alleges that "[w]ithin days" of advertising on Yelp, her company's "overall star rating increased to 4 stars and various five star reviews were reinstated" 15 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP facts that are entirely consistent with the supposed statements made by Yelp during a sales call months earlier. Compare id. 69-71 with id. 74. Nor do Plaintiffs attempt to explain how any alleged representation supposedly made by Yelp concerning the benefits of advertising on Yelp were false: Plaintiff C&D concedes that it never purchased advertising from Yelp (id. 56-58), making it impossible to assess the accuracy of any statements to C&D concerning the benefits it would have received had it advertised. And BHB alleges merely that after purchasing advertising on Yelp, users posted negative reviews to its business page, while other positive reviews were removed. Id. 87-88. But these allegations in no way demonstrate how, or whether, any alleged statements were false, and BHB does not allege that Yelp ever suggested that it could prevent users from posting negative reviews on its business page, or prevent positive reviews from being removed by users or Yelp's automated filter. Id. 82-85. Because Plaintiffs do not identify a single statement that is alleged to be false, and because there is no indication whatsoever as to how any purported statement to Plaintiffs was false (much less with the specificity required by Rule 9(b)), Plaintiffs' FAL and UCL claims must be dismissed. See, e.g., In re Actimmune Mktg. Litig., 614 F. Supp. 2d 1037, 1055 (N.D. Cal. 2009) (Patel, J.) (dismissing UCL claims where allegations did not provide a basis from which court could infer that the statements were false or something other than puffery); Smith v. Nat'l City Bank of Ind., No. C 09-5715, 2010 WL 1729392, at *3 (N.D. Cal. Apr. 27, 2010) (dismissing UCL claim where plaintiff failed to allege facts "as to why the statement by [defendant] . . . was false"). 3. Plaintiffs Fail to Allege Reliance on Any Statement to Their Detriment Plaintiffs also fail to allege that they relied on any false or misleading statement to their detriment, as required. "A class representative proceeding on a claim of misrepresentation as the basis of his or her UCL [or FAL] action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions." In re Tobacco II Cases, 46 Cal. 4th at 306. As detailed in Sections III.B.1.(b) & B.2, none of the Plaintiffs plead reliance on any misstatement by Yelp. Indeed, the Non-Sponsor Plaintiffs concede that they did not purchase advertising from Yelp, precluding any showing of reliance here. Separately, the Sponsor Plaintiffs fail to allege, as they must, that they relied upon any alleged misrepresentation when purchasing 16 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP advertising. To the contrary, Plaintiff Chan admits that she decided to purchase advertising, not as the result of any misstatement made by Yelp, but due to a "decline in new patients" several months after she was contacted by Yelp. FAC 74. And while Plaintiff BHB suggests that it relied upon supposed "promises" made by an unidentified Yelp sales representative in purchasing advertising, it fails to allege or explain how these "promises" were false or misleading in any respect. Id. 85-87. Plaintiffs' failure to plead specific or plausible allegations that they relied on any alleged misstatement also requires dismissal of their claims under the UCL and FAL. See Halton Co., 2010 WL 2077203, at *4 (dismissing UCL claims for failure to allege "a plausible theory of reliance" where plaintiff failed to specify the "who, what, when, where, and how" of the supposed misrepresentations); Laster, 407 F. Supp. 2d at 1194 (dismissing UCL and FAL claims where plaintiffs had not alleged that they purchased cell phones as a result of allegedly false advertising). 4. Plaintiffs Fail to Allege that Yelp Caused Their Purported Injuries As detailed extensively in Section IV.B.1.(b), Plaintiffs also have failed to allege any causal connection between their purported injuries and any misrepresentations by Yelp, much less with the specificity required under Rule 9(b). Plaintiffs' FAL and UCL claims must be dismissed for this independent reason. See Actimmune, 2009 WL 3740648, at *11 (dismissing UCL claims where plaintiffs did not allege facts indicating "that any of [the] . . . misrepresentations caused injury to plaintiffs by inducing them to pay for Actimmune"). D. Plaintiff Fails To State a Claim Under The UCL Plaintiffs also fail to state a valid claim for violation of the UCL, which requires a showing that Yelp engaged in an "unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof. Code 17200; Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824, 837 (2006). Despite vague allegations that Yelp has engaged in "misrepresentations," "extortion," and unspecified "unfair" acts, the Amended Complaint lacks facts that give rise to a plausible inference that Yelp engaged in conduct that could be deemed "unlawful, unfair or fraudulent." See e.g., FAC 106, 109, 113, 115. 17 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP 1. Plaintiffs Have Not Alleged "Fraudulent" Conduct As discussed previously, Plaintiffs allege that Yelp made unspecified "deceptive statements and misrepresentations" in violation of the UCL. FAC 106, 111. As demonstrated in Section IV.C.2, however, Plaintiffs' claims of "deceptive" statements and "misrepresentations" fail because they do not identify or explain how any statement is fraudulent as they must to avoid dismissal of their claims under the "fraudulent" prong of the UCL. See, e.g., Kearns, 567 F.3d at 1127 (affirming dismissal of plaintiff's UCL claims where allegations of fraudulent conduct failed to "satisfy the particularity requirement of Rule 9(b)"). See supra pp. 14-17. 2. Plaintiffs Have Not Alleged "Unlawful" Conduct The "unlawful" prong of the UCL "borrows violations of other laws . . . and makes those unlawful practices actionable under the UCL." Actimmune, 2009 WL 3740648, at *15. "Thus, a violation of another law is a predicate for stating a cause of action under the UCL's unlawful prong." Id. Here, Plaintiffs do not identify any law allegedly violated by Yelp; rather, they claim that Yelp "attempted to or did in fact commit extortion." FAC 109. Because Plaintiffs fail to plead facts demonstrating extortion, their claim under the UCL's "unlawful" prong also should be dismissed. As an initial matter, extortion is a "duress" claim that must be pled with particularity. See, e.g., Leeper v. Beltrami, 53 Cal. 2d 195, 205 (1959) ("Duress is a species of fraud"). Because Plaintiffs do not satisfy the stringent requirements for pleading claims of fraud under Rule 9(b), their "unlawful" claim should be dismissed for this reason alone. See supra pp. 14-17. Plaintiffs also fail to plead even the most basic facts necessary to allege extortion. Extortion consists of "obtaining of property from another, with his consent . . . induced by a wrongful use of force or fear." Cal. Penal Code 518 (emphasis added). Because extortion requires a showing that property was acquired by means of "force or fear," it may be found only when the victim is so fearful of a defendant's threatened action that he is "coerced . . . [into] surrender[ing] his property." People v. Goodman, 159 Cal. App. 2d 54, 61 (1958). As such, a threat is an essential element of extortion. Mitchell v. Sharon, 59 F. 980, 982 (9th Cir. 1894). Here, Plaintiffs do not allege that Yelp threatened them, as is required to demonstrate extortion. Plaintiffs allege instead that Yelp offered them various benefits if they advertised with 18 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & Crutcher LLP Yelp offers that, in most cases, Plaintiffs admittedly declined. For example, Sponsor Plaintiff Chan alleges that she was told "Yelp could offer her lots of benefits" before she "declined to purchase Yelp advertising." FAC 69, 72 (emphasis added); see also id. 82-85 (alleging that BHB received "promises" of advertising benefits). Yelp's alleged offers of various advertising benefits cannot support a claim for extortion as a matter of law. For example, in Sigmond v. Brown, 645 F. Supp. 243, 246 (C.D. Cal. 1986), the court found that defendant's offer to provide a chiropractor with more favorable reviews by the chiropractor peer review committee in exchange for client referrals was not an extortionist threat, but merely an offer. See also People v. Anderson, 75 Cal. App. 365, 374-75 (1925), disapproved of on other grounds by In re Wright, 65 Cal. 2d 650 (1967) (no threat and hence no extortion where defendant offered to drop criminal charges in exchange for payment). Moreover, the Non-Sponsor Plaintiffs cannot demonstrate extortion because, by their own admission, they refused to purchase advertising or provide any other property to Yelp an essential element of an extortion claim. See FAC 47-49, 57-58; see, e.g., Arista Records v. Sanchez, No. CV 05-07046, 2006 WL 5908359, at *2 (C.D. Cal. Mar. 1, 2006) (dismissing extortion counterclaim for failure to allege that any property was taken). Likewise, the Spo

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