Levitt v. Yelp! Inc.

Filing 59

MOTION to Dismiss SECOND AMENDED CLASS ACTION COMPLAINT & TO DISMISS OR STRIKE CLASS ACTION ALLEGATIONS; MEMO OF POINTS & AUTHORITIES filed by Yelp! Inc.. Motion Hearing set for 2/7/2011 02:00 PM in Courtroom 15, 18th Floor, San Francisco before Hon. Marilyn H. Patel. (Beringer, Susan) (Filed on 12/17/2010)

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Levitt v. Yelp! Inc. Doc. 59 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 D/B/A RENAISSANCE RESTORATION, CATS AND DOGS ANIMAL HOSPITAL, INC., TRACY CHAN D/B/A MARINA DENTAL CARE and PROFESSIONAL CONSTRUCTION GROUP, INC. D/B/A PAVER PRO; 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 SECOND AMENDED CLASS ACTION COMPLAINT AND TO DISMISS OR STRIKE CLASS ACTION ALLEGATIONS; MEMORANDUM OF POINTS AND AUTHORITIES Date: February 7, 2011 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 I. II. III. ISSUES TO BE DECIDED ...................................................................................................... 1 INTRODUCTION AND SUMMARY OF ARGUMENT ....................................................... 1 ALLEGATIONS IN THE COMPLAINT................................................................................. 3 A. Yelp's Online Review Service ...................................................................................... 3 1. Yelp's Automated Review Filter ...................................................................... 4 2. Yelp's Advertising Program ............................................................................. 4 Named Plaintiffs' Allegations....................................................................................... 4 1. Non-Sponsor Plaintiffs:..................................................................................... 4 a. Boris Levitt ........................................................................................... 4 b. Cats & Dogs .......................................................................................... 6 2. Sponsor Plaintiffs .............................................................................................. 7 a. Tracy Chan ............................................................................................ 7 b. Paver Pro ............................................................................................... 9 3. Plaintiffs Fail To Allege the Core Elements of Their Claims........................... 9 Class Allegations......................................................................................................... 10 The Second Amended Complaint ............................................................................... 11 B. C. D. IV. ARGUMENT .......................................................................................................................... 11 A. Applicable Legal Standard.......................................................................................... 11 1. Motion to Dismiss for Lack of Standing Under Rule 12(b)(1)....................... 11 2. Motion to Dismiss Under Rule 12(b)(6) ......................................................... 11 Plaintiffs Lack Standing To Pursue Their Claims ...................................................... 12 1. Plaintiffs Lack Article III Standing................................................................. 12 a. Plaintiffs Fail to Sufficiently Allege an Injury In Fact ....................... 12 b. Plaintiffs Have Not Alleged a Non-Speculative Causal Connection .......................................................................................... 14 c. Plaintiffs Fail to Sufficiently Allege a Redressable Injury ................. 16 2. Plaintiffs Also Lack Standing Under the UCL ............................................... 16 Plaintiffs Also Fail To State A Claim Under The UCL .............................................. 17 1. Plaintiffs Have Not Alleged "Unlawful" Conduct.......................................... 18 a. Plaintiffs Fail to Allege That Yelp Engaged in a Threat of Unlawful Injury or Wrongful Use of Fear .......................................... 18 i B. C. 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 TABLE OF CONTENTS [Continued] Page b. Non-Sponsors Plaintiffs Also Fail to Allege That They Provided Property to Yelp................................................................... 20 c. Plaintiffs Do Not Allege That Fear Was the Controlling Cause of Any Decision To Advertise ................................................. 21 d. Plaintiffs Fail to Allege That Any Purported "Fear" Was Reasonable .......................................................................................... 21 Plaintiffs Have Not Alleged "Unfair" Conduct .............................................. 22 2. D. E. F. V. Because Plaintiffs Do Not Have Standing and Fail to State a Sufficient Claim, the Class Allegations Also Must Be Dismissed .............................................. 23 The Second Amended Complaint Should Be Dismissed Without Leave to Amend..................................................................................................................... 23 Plaintiffs Cannot Plead Legally Sufficient Class Allegations..................................... 23 CONCLUSION ....................................................................................................................... 25 ii 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 TABLE OF AUTHORITIES Page(s) CASES Arista Records v. Sanchez, No. CV 05-07046, 2006 WL 5908359 (C.D. Cal. Mar. 1, 2006) ............................................ 21 Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) ............................................................................................................. 12 Augustine v. United States, 704 F.2d 1074 (9th Cir. 1983)............................................................................................ 11, 19 Baba v. Hewlett-Packard Co., No. C 09-05946, 2010 WL 2486353 (N.D. Cal. June 16, 2010) ............................................. 23 Barnum Timber Co. v. U.S. Envtl. Prot. Agency, No. C 08-01988 WHA, 2008 WL 4447690 (N.D. Cal. Sept. 29, 2008) .................................. 14 Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009).................................................................................................... 17 Brazil v. Dell Inc., 585 F. Supp. 2d 1158 (N.D. Cal. 2008) ................................................................................... 24 Browne v. Avvo, Inc., 525 F. Supp. 2d 1249 (W.D. Wash. 2007)............................................................................... 16 Buena Vista, LLC v. New Res. Bank, No. 10-1502 CW, 2010 WL 3448561 (N.D. Cal. Aug. 31, 2010) ........................................... 22 Californians for Disability Rights v. Mervyn's, LLC, 39 Cal. 4th 223 (2006) ....................................................................................................... 12, 17 Carafano v. Metrosplash, 339 F.3d 1119 (9th Cir. 2003).................................................................................................. 15 Carbo v. United States, 314 F.2d 718 (9th Cir. 1963).................................................................................................... 22 Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co. 20 Cal. 4th 163 (1999) ............................................................................................................. 23 Chan v. Lund, 188 Cal. App. 4th 1159 (2010) ................................................................................................ 21 Clayworth v. Pfizer, Inc., 49 Cal. 4th 758 (2010) ............................................................................................................. 17 Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824 (2006) .................................................................................................. 18 Dodd-Owens v. Kyphon, Inc., No. C06-3988, 2008 WL 410241 (N.D. Cal. Feb. 12, 2008)................................................... 25 iii 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 TABLE OF AUTHORITIES [Continued] Page(s) Gardner v. Martino, 563 F.3d 981 (9th Cir. 2009).................................................................................................... 16 Goddard v. Google, Inc., 640 F. Supp. 2d 1193 (N.D. Cal. 2009) ................................................................................... 16 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) ..................................... 18 In re Stac Elecs. Sec. Litig., 89 F.3d 1399 (9th Cir. 1996).................................................................................................... 12 In re Tobacco II Cases, 46 Cal. 4th 298 (2009) ............................................................................................................. 17 In re Wright, 65 Cal. 2d 650 (1967) .............................................................................................................. 20 Johnson v. Weinberger, 851 F.2d 233 (9th Cir. 1988).................................................................................................... 12 Lee v. Capital One Bank, No. C 07-4599, 2008 WL 648177 (N.D. Cal. Mar. 5, 2008) ................................................... 13 Leong v. Square Enix of Am. Holdings, Inc. ........................................................................................ 23 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) ................................................................................................................. 12 Mazur v. eBay Inc., No. C 07-03967, 2008 WL 618988 (N.D. Cal. Mar. 4, 2008) ................................................. 15 McDonald v. Coldwell Banker, 543 F.3d 498 (9th Cir. 2008).................................................................................................... 22 Missing Link, Inc. v. Ebay, Inc., 2008 WL 1994886 (N.D. Cal. May 5, 2008) ........................................................................... 17 Mitchell v. Sharon, 59 F. 980 (9th Cir. 1894).......................................................................................................... 19 O'Shea v. Littleton, 414 U.S. 488 (1974) ................................................................................................................. 23 People v. Anderson, 75 Cal. App. 365 (1925)........................................................................................................... 20 iv 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 TABLE OF AUTHORITIES [Continued] Page(s) People v. Goodman, 159 Cal. App. 2d 54 (1958)...................................................................................................... 21 People v. Sales, 116 Cal. App. 4th 741 (2004) .................................................................................................. 19 Petrochem Insulation, Inc. v. N. Cal. & N. Nev. Pipe Trades Counsel, No. C-90-3628 EFL, 1991 WL 158701 (N.D. Cal. Apr. 30, 1991) ......................................... 20 Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530 (9th Cir. 1984).................................................................................................... 11 Rothman v. Vedder Park Mgmt., 912 F.2d 315 (9th Cir. 1990).................................................................................................... 20 Rubio v. Capital One Bank, 613 F.3d 1195 (9th Cir. 2010).................................................................................................. 17 Sanders v. Apple, Inc., 672 F. Supp. 2d 978 (N.D. Cal. 2009) ............................................................................... 11, 13 Sigmond v. Brown, 645 F. Supp. 243 (C.D. Cal. 1986)........................................................................................... 20 Sisseton-Wahpeton Sioux Tribe v. United States, 90 F.3d 351 (9th Cir. 1996)...................................................................................................... 24 Smith & Hawken, Ltd. v. Gardendance, Inc., No. C04-1664, 2004 WL 2496163 (N.D. Cal. Nov. 5, 2004).................................................. 23 Sosa v. DIRECTV, Inc., 437 F.3d 923 (9th Cir. 2006).................................................................................................... 20 Stearns v. Select Comfort Retail Corp., No. 08-cv-02746, 2009 WL 4723366 (N.D. Cal. Dec. 4, 2009).............................................. 24 Sustainable Delta v. Fed. Emergency Mgmt. Grp., 711 F. Supp. 2d 1152 (E.D. Cal. 2010).................................................................................... 14 Two Jinn, Inc. v. Gov't Payment Serv., Inc., 2010 WL 1329077 (S.D. Cal. Apr. 1, 2010) ............................................................................ 13 United States v. Billingsley, 474 F.2d 63 (6th Cir. 1973)...................................................................................................... 22 United States v. Marsh, 26 F.3d 1496 (9th Cir. 1994).................................................................................................... 22 United States v. Sequel Contractors, Inc., 402 F. Supp. 2d 1142 (C.D. Cal. 2005) ................................................................................... 17 Vinole v. Countrywide Home Loans, Inc., 246 F.R.D. 637 (S.D. Cal. 2007).............................................................................................. 26 v 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 TABLE OF AUTHORITIES [Continued] Page(s) Wolk v. Green, 516 F. Supp. 2d 1121 (N.D. Cal. 2007) ................................................................................... 20 STATUTES 18 U.S.C. 1951 .................................................................................................................................. 18 18 U.S.C. 1951(b)(2)......................................................................................................................... 19 47 U.S.C. 230(c) ........................................................................................................................... 3, 15 Cal. Bus. & Prof. Code 17200 .......................................................................................................... 18 Cal. Penal Code 518.............................................................................................................. 18, 19, 20 Cal. Penal Code 519.................................................................................................................... 18, 19 Cal. Penal Code 519(2) ..................................................................................................................... 19 Cal. Penal Code 519(3) ..................................................................................................................... 19 Cal. Penal Code 519(4) ..................................................................................................................... 19 Cal. Penal Code 523.......................................................................................................................... 18 Cal. Penal Code 524.................................................................................................................... 18, 19 F.R.C.P. 12(b) ................................................................................................................................... 11 F.R.C.P. 12(b)(6)............................................................................................................................... 11 vi 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 NOTICE OF MOTION AND MOTION TO DISMISS SECOND AMENDED CLASS ACTION COMPLAINT AND TO DISMISS OR STRIKE CLASS ACTION ALLEGATIONS TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that at 2:00 p.m. on February 7, 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' Second Amended Class Action Complaint ("SAC" or "Amended Complaint") for a violation of California Business and Professions Code Section 17200 et seq. (the "Unfair Competition Law" or "UCL") under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Yelp also moves to strike and/or dismiss the class action allegations in the SAC under Rules 12(b)(6), 12(f) and/or 23 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 Law? 2. 3. Do Plaintiffs state a legally sufficient claim against Yelp for violations of the UCL? Should Plaintiffs' class allegations be dismissed or stricken pursuant to Federal Rules of Civil Procedure 12(b)(6), 12(f) and 23 because they failed to plead an ascertainable or manageable class or to allege commonality and typicality among the proposed class members? 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 website that allows members of the public to read and write online reviews about their experiences with local businesses. The integrity of these 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 and solicit fake reviews. As Plaintiffs 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 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 consumer reviews or that positive reviews were removed as unreliable by Yelp's automated filter. But Plaintiffs fail to allege a coherent or actionable theory that Yelp is responsible for their speculative injuries. Indeed, Plaintiffs contend that they were injured by reviews whether or not they advertised on Yelp, defeating the premise that Yelp somehow manipulates reviews in favor of advertisers. Plaintiffs also cannot link any alleged harm to any purported "extortion" by Yelp, and fail to allege that Yelp made a single threat of unlawful injury. Unable to suppress public discussion about their businesses online or to succeed in their efforts to post fake positive reviews about their businesses on Yelp, Plaintiffs filed this lawsuit, asserting contrived and deficient claims for violation of California's Unfair Competition Law and a host of other claims. Plaintiffs' claims have been a moving target, and they have filed no fewer than five different pleadings in an attempt to state a viable theory against Yelp. While the First Amended Complaint asserted that Yelp somehow had engaged in "deceptive" or "misleading" sales practices, Plaintiffs abandoned these claims in response to Yelp's latest motion to dismiss, and now premise their case on unsupported allegations of "extortion." Plaintiffs' latest effort fares no better than their prior failures, and the Second Amended Complaint should be dismissed with prejudice. As a threshold matter, Plaintiffs fail to meet the most basic requirements for standing under Article III of the United States Constitution or the UCL. Plaintiffs do not allege any particularized "injury-in-fact," and instead rely on vague and unsupported claims of "lost business" and reputational harm that are insufficient to demonstrate standing here. Plaintiffs' sole UCL claim also fails because they fail to allege any conduct that is "unlawful" or "unfair." Although Plaintiffs attempt to base this claim on speculative allegations of extortion, they do not plead a single instance where Yelp threatened to wrongfully injure a business unless it advertised on Yelp a basic and required element of any claim for actual or attempted extortion. Instead, Plaintiffs allege merely that Yelp offered them a range of different advertising benefits that cannot constitute extortion as a matter of law. 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 At bottom, Plaintiffs' claims are nothing more than vague complaints about the content of negative reviews posted by consumers and Yelp's use of an automated screening filter to ensure that reviews posted on its website are authentic. 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 from claims arising from publishing or screening user content online. Even at the pleading stage, it also is apparent that Plaintiffs cannot possibly pursue their claims on behalf of a putative class of businesses contacted by Yelp about advertising. The proposed class definition is hopelessly overbroad and encompasses hundreds of thousands of businesses, whether or not Yelp made any threats of unlawful injury that reasonably induced fear. Further, any attempt to assess what occurred in hundreds of thousands of individual discussions with such businesses or to determine whether millions of consumer reviews were properly removed or reinstated would be impossible. Because the alleged class definition is fatally deficient, and because Plaintiffs cannot certify a class on the fact-intensive claim asserted here under any class definition, this Court also should dismiss or 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. SAC 2, 21-24. As Plaintiffs admit, the reviews on Yelp's website are written by members of the public, who rate local businesses on a scale of one to five stars. Id. 2, 22-23. As disclosed on portions of Yelp's website referenced in the Second Amended Complaint, well over 14 million reviews have been posted to Yelp's website, and the overwhelming majority of these reviews are positive approximately 83% of reviews are 3 stars or 1 The following allegations are deemed to be true solely for purposes of this motion. Yelp vigorously denies that it engaged in any misconduct or manipulated reviews, and if this case were to proceed past the pleading stage, Yelp would demonstrate that Plaintiffs' allegations are false. 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 higher, whether or not the business advertises on Yelp. See Exhibit 1 to Declaration of Ashlie Beringer ("Beringer Decl.") (referenced in 2-3, 5 of the SAC).2 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." SAC 5. The review filter is critical to ensuring that consumers see the most reliable reviews posted on Yelp, rather than those that might have been written by a business owner seeking to deceptively promote its own business or tarnish a competitor. See id. 6; Beringer Decl. Ex. 2 (cited in 3, 5 of the SAC). The filter does not take into account whether or not a business advertises with Yelp, and instead filters reviews based on an automated analysis of "how established a particular reviewer is." Id. As Yelp discloses on its website (in disclosures referenced in the SAC), because a reviewer's activities and "trustworthiness" can vary over time, "reviews can disappear and reappear over time" based on the reviewer's varying involvement with Yelp. Beringer Decl. Ex. 2. 2. Yelp's Advertising Program Yelp also provides businesses with an opportunity to advertise on Yelp.com. See Beringer Decl. Ex. 3. Advertisers are featured in clearly designated sponsored results at the top of Yelp search results and on related business pages. Id.3 In addition, 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. B. Named Plaintiffs' Allegations 1. Non-Sponsor Plaintiffs: a. Boris Levitt Boris Levitt concedes that his business received "several positive reviews" and only "one Because the Second Amended Complaint specifically references and relies upon disclosures contained on 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). 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, it has since discontinued this program. 4 YELP'S MOTION TO DISMISS AND TO STRIKE CV 10-01321 MHP 2 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 negative review" after signing up for a free business account on Yelp in 2008 more than one year before he ever spoke to anyone at Yelp about advertising. Id. 43, 45. Levitt nevertheless complains that certain positive reviews were removed from his business's Yelp page before and after he received an offer to purchase advertising on Yelp. Levitt alleges that when he contacted Yelp in May 2009 to "inquire about why a positive review of his business had disappeared," a representative of Yelp informed him (correctly) that she could not "assist him in removing [sic] the [positive] review." SAC 44. In earlier pleadings, Levitt further conceded that this representative informed him 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.4 First Amended Complaint (Dkt. Entry #48, Sept. 23, 2010) ("FAC") 43, 45. Levitt alleges that he was contacted a few months later by a Yelp sales representative, who suggested (again, accurately) that Levitt could increase his "page views" by advertising on Yelp. SAC 46. "[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" (despite not advertising). Id. Levitt contends that after he declined to advertise on Yelp, additional 5-star reviews were removed from his business page conditions that existed months before he declined to advertise on Yelp. Id. 43-44, 46, 48. Levitt fails to allege any facts suggesting that these reviews were removed by any means other than the normal operation of Yelp's automated review filter. See id. 5-6. Instead, in the Second Amended Complaint, Levitt adds the bald assertion, "on information and belief," that "Yelp manipulated the reviews of Levitt's business because he did not purchase advertising," despite paradoxically conceding that he received negative reviews, and lost positive reviews, months before declining to advertise. Id. 43-45, 49. Levitt vaguely complains that he experienced "a loss of sales, revenues and/or assets" and that his "business's reputation was injured," although he fails to identify a single customer he lost due to 4 Levitt removed these admissions from the Second Amended Complaint, apparently to obscure the fact that Yelp truthfully informed him in writing that it could not manipulate reviews on his behalf. 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 any alleged conduct by Yelp (or otherwise) or to provide any specifics concerning how, or whether, his business was harmed due to any unlawful conduct by Yelp. Id. 54. b. Cats & Dogs Cats and Dogs ("C&D") focuses on two negative consumer reviews it received before receiving an offer to advertise on Yelp. SAC 57, 61. Specifically, C&D alleges that it first contacted Yelp in September 2009 to request removal of a review alleged to be "negative" and "possibl[y] fals[e]". Id. 57-58. Thereafter, the negative review was "removed," even though C&D did not advertise. Id. 59-60. C&D then alleges it received a second negative review. Id. 61. C&D claims that about four months later it received a sales call from "Kevin," who allegedly offered various advertising benefits, including the ability to "hide negative reviews" or "place them lower on the listing page" (allegations that Yelp vigorously denies). Id. 63. C&D "declined the [alleged] offer, saying that [it] wanted to track referrals from Yelp . . . without ads." Id. 64. C&D contends that after it declined to advertise with Yelp, "highly negative, inflammatory" reviews continued to reappear on its business page, just as they had before, but that Yelp was unwilling to remove these reviews consistent with its stated policies. Id. 5-6, 65-68. C&D now asserts (on "information and belief") that Yelp somehow published these third-party reviews "as a threat" to cause C&D to advertise. Id. 66. Yet, C&D concedes that Yelp in fact advised that it was unable to remove these customer reviews because it does "not have firsthand knowledge of a reviewer's identity or personal experience" and was "not in a position to verify [C&D's] claims that these reviewers . . . are connected to the recent vandalism at your hospital" and not because C&D had not purchased advertising. Id. 69. C&D concludes by speculating that "[a]s a result of Yelp's conduct," it received "fewer customers" and a "decrease in business revenues." SAC 73. C&D further alleges that "negative reviews" posted by third-party customers and not any unlawful conduct by Yelp harmed its "business reputation." Id.5 5 In fact, C&D conceded in its earlier complaint 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[Footnote continued on next page] 6 CV 10-01321 MHP YELP'S MOTION TO DISMISS AND TO STRIKE 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 2. Sponsor Plaintiffs a. Tracy Chan Tracy Chan alleges that a Yelp representative supposedly called to "offer her lots of benefits" if she advertised on Yelp, such as "the opportunity" to "hid[e] or bury[] bad reviews" and to "put pictures on the Yelp page." SAC 77. Chan concedes that she "ultimately declined to purchase Yelp advertising" in response to these purported offers (which Yelp denies were made). Id. 79. Chan complains that, thereafter, various "5-star reviews" were removed from her business's page although, like the other Plaintiffs, she fails to allege facts indicating that these reviews were removed due to anything other than the normal operation of Yelp's review filter. Id. 80. In her first complaint, Chan conceded that several months after speaking with Yelp about advertising, she elected to purchase advertising on Yelp due to "months of experiencing a decline in new patients" and not due to any alleged threats by Yelp. FAC 74. Chan now asserts for the first time that before purchasing advertising, she had a further conversation with Yelp conspicuously absent from her earlier pleading in which a Yelp representative purportedly told her that Yelp occasionally "tweeks" ratings and could "help her" in unspecified ways if she advertised. SAC 81. Based on these recent allegations, Chan now asserts that she "believed" Yelp "manipulated" reviews about her business and that she purchased advertising on Yelp "so that Yelp would reinstate the positive reviews" and prevent "the posting of negative reviews" by consumers. Id. 82-83. As in her earlier complaint, however, Chan does not allege that any representative of Yelp ever threatened (or even suggested) that Yelp would harm Chan's business or manipulate reviews if she did not advertise on Yelp. Instead, Chan asserts merely that Yelp supposedly offered vague "advertising services." Id. 81. Chan signed a one-year contract with Yelp "for advertising" in early August 2008. SAC 83. Nowhere does Chan allege that she failed to receive the benefits specified in her contract with Yelp. Instead, Chan alleges that her "overall star rating" initially increased after purchasing advertising, but [Footnote continued from previous page] star rating" admissions C&D conspicuously removed from the Second Amended Complaint because they conflict with its trumped up allegations of "injury." FAC 63. 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 declined shortly thereafter defeating the spurious premise that Yelp somehow manipulates reviews in favor of advertisers. Id. 83-84. In the Second Amended Complaint, Chan also claims that after entering into a one-year advertising contract, a Yelp salesperson requested that she make an "increased payment" for advertising with Yelp allegations also conspicuously absent from her earlier pleading. Id. 84. Chan fails to describe the additional benefits she supposedly was offered by this representative, and again, fails to allege that Yelp in any way threatened to harm or manipulate reviews for Chan's business unless she increased her advertising commitment with Yelp. Id. Chan cancelled her one-year advertising contract in October 2008 just two months after advertising on Yelp, and in the face of consumer reviews that were "again declining." SAC 84-85. Chan complains that some time after she stopped advertising, positive reviews were removed from her business page, while negative consumer reviews continued to appear just as they had during the brief period that she advertised. Id. 85. Although Chan adds allegations "on information and belief" that Yelp somehow removed the positive reviews to "cause Chan to fear" that it would remove positive reviews unless she paid for advertising, she alleges no facts that in any way support this claim, nor does she point to any statement or conduct by Yelp that could reasonably have contributed to this belief. Id. 85-86. Ultimately, Chan complains that during the 18 months after she stopped advertising on Yelp, several positive reviews were removed from her business page (as was the case before and during the period she advertised on Yelp), and that her "overall star rating fell" although she again fails to allege any facts demonstrating that the removal of these reviews by Yelp's automated filter, or the posting of negative consumer reviews, was in any way unlawful. Id. 86-90. Chan alleges that she "lost money in advertising costs she paid to Yelp" purportedly "to avoid Yelp's manipulation of reviews," although she does not allege that anyone from Yelp stated or implied that Yelp would manipulate reviews or her "star rating" unless she purchased advertising. Id. 91. Chan also makes vague and speculative allegations that she lost "sales, revenue, and/or assets" as a result of Yelp's "conduct," and that her "business's reputation" was injured "due to the posting of negative reviews and/or removal of positive reviews" created by third parties. Id. 92. 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 b. Paver Pro Paver Pro alleges that it received several positive reviews, and some negative reviews, before it elected to purchase advertising on Yelp. SAC 95-97. It complains that some of these positive reviews were later removed, while two negative customer reviews remained on its business page although it provides no facts that suggest that this was due to anything other than the routine application of Yelp's automated review filter. Id. 97. Although Paver Pro alleges "upon information and belief" that these reviews were removed (or "maintained") as a "threat to cause Paver Pro to fear" that its "star rating would be low" unless it purchased advertising, it cites no facts in support of this speculative claim. Id. 98. In fact, Paver Pro concedes that it never spoke to anyone at Yelp about advertising, and instead, purchased advertising on its own initiative through Yelp's website, with the unfounded hope that the "positive reviews it received would be reinstated." Id. 99. Paver Pro alleges that at some point after it purchased advertising, "many of the positive reviews that had disappeared were reinstated." Id. 100. Despite having an "overall Yelp star rating of 4 stars" in January 2010, Paver Pro apparently decided to stop advertising on Yelp in March 2010. Id. 101-102. Paver Pro asserts that in April 2010, its overall star rating on Yelp dropped to 3 stars, although it conspicuously fails to disclose its star rating at the time it stopped advertising on Yelp, one month earlier. Id. 101, 103. Paver Pro contends that it somehow "lost money in advertising costs," even as it alleges that positive reviews were "reinstated" and that its star rating was high during the period it advertised on Yelp. Id. 100-104. In addition, Paver Pro alleges an unspecified "decrease" in its "business revenues" due to "fewer customers" and "fewer Yelp users" viewing its business page. Id. 105. Like the other Plaintiffs, Paver Pro contends that its "business's reputation was injured" by "negative reviews" posted by third parties "and/or removal of positive reviews" by Yelp's automated filter. Id. 3. Plaintiffs Fail To Allege the Core Elements of Their Claims Although the named Plaintiffs make wildly disparate and inconsistent claims concerning Yelp's alleged conduct, each fails to plead any of the basic facts necessary to support their sole UCL claim here. Indeed: 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 No Plaintiff alleges that any representative of Yelp threatened, or even implied, that Yelp would subject it to harm unless it advertised on Yelp. Indeed, one Plaintiff (Paver Pro) did not even speak to a Yelp representative. Likewise, no Plaintiff alleges that it was compelled to give property to Yelp based on any threat or wrongful use of fear by Yelp. To the contrary, the two Non-Sponsor Plaintiffs concede that they declined to purchase advertising in response to Yelp's generalized offers, and the one Sponsor Plaintiff who actually spoke to Yelp (Chan) fails to allege any conduct by Yelp that was remotely threatening or that could reasonably induce fear. No Plaintiff pleads any facts to support the contention "upon information and belief" that Yelp "manipulated" third-party reviews on behalf of advertisers. In fact, NonSponsor Plaintiffs (like C&D) conceded that they received positive reviews and high star ratings even without advertising on Yelp, while Sponsor Plaintiffs (like Chan) complained about declining ratings during the period that they advertised. All Plaintiffs allege generalized "harm" to their business in the most speculative terms, and no Plaintiff identifies a single customer relationship that was disrupted or sale that was lost. Plaintiffs also fail to allege facts demonstrating how these vague "injuries" were caused by any unlawful conduct by Yelp, as opposed to the content of customer reviews authored by third parties and Yelp's use of an automated screening tool. 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 by Yelp in a manner that did not comply with Yelp's representations regarding its Review Terms." SAC 108(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 threatening or other wrongful conduct during those communications, and whether or not those communications could reasonably have induced fear. Id. Likewise, the proposed class definition necessitates an inquiry into the representations (if any) by Yelp to each putative class member regarding its "Review Terms," and a review-by-review analysis of whether the removal and/or reinstatement of millions of third-party reviews was conducted "in a manner that did not comply with" those representations. Id. 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 D. The Second Amended Complaint The Second Amended Complaint is the fifth pleading to be filed in these consolidated actions. After the Court appointed lead counsel and ordered Plaintiffs to file a consolidated amended complaint, Plaintiffs filed the First Amended Complaint alleging claims for violations of the UCL, California's False Advertising Law, and intentional interference with prospective business advantage, alleging that Yelp had engaged in "deceptive statements and misrepresentations to business owners" to induce them to advertise on Yelp. See, e.g., FAC 106, 121, 123. After Yelp moved to dismiss the First Amended Complaint (Docket No. 48), Plaintiffs once again sought to amend their pleading, and removed all claims of "false" and "deceptive" conduct under the UCL and False Advertising Law, as well as its intentional interference claim. This time, the Second Amended Complaint rests on a different theory, premised entirely on unsubstantiated claims of "extortion" or "attempted extortion." SAC 117-130. IV. A. Applicable Legal Standard 1. Motion to Dismiss for Lack of Standing Under Rule 12(b)(1) ARGUMENT 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 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 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). 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 fail to satisfy the statutory standing requirements applicable to their claims under the UCL. See Californians for Disability Rights v. Mervyn's, LLC, 39 Cal. 4th 223, 227-29 (2006). Because Plaintiffs fail to make plausible, non-speculative allegations that they suffered an injury in fact, or that they have lost "money or property" or suffered any non-speculative injury as a direct result of Yelp's allegedly wrongful conduct, Plaintiffs lack standing under either Article III or the UCL. 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 an unspecified "loss of sales, revenues and/or assets," and non-specific harm to their "business's 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 reputation." SAC 54, 73, 92, 105.6 Tellingly, Plaintiffs do not point to a single lost customer, and they provide no details or factual support for their speculative claims of injury. Instead, Plaintiffs rely on vague and unsupported claims of lost business and goodwill, alleging, for example, that "fewer customers patronized the business[es], which caused a decrease in business revenues." See id. 54, 73, 92,105; see also id. 91 (alleging that Chan "experienced a decline in new patients"); id. 104 (alleging "Paver Pro also experienced a decline in business"). 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., 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 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" and reputational harm are based entirely on impermissible conjecture. Id. Such speculative assertions are wholly insufficient to establish Article III standing. See Sanders, 672 F. Supp. 2d at 984 (dismissal 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.) (dismissal for lack of Article III standing where injury was "hypothetical" and not "actual or imminent"). 6 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. 14-16. 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 b. Plaintiffs Have Not Alleged a Non-Speculative Causal Connection Likewise, Plaintiffs cannot establish standing because they do not allege any nexus between their purported "injuries" and any unlawful conduct 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"). Non-Sponsor Plaintiffs Non-Sponsor Plaintiffs fail to allege any facts creating a plausible inference that any "decline" in their business or reputation was caused by any extortion or other unlawful conduct by Yelp. Nor can they: the Non-Sponsor Plaintiffs concede that they never purchased advertising from Yelp. SAC 46, 64. Instead, Levitt asserts merely that "fewer customers patronized his business" sometime after he declined to purchase advertising, but he does not allege as he must any facts that could support a finding that this unspecified "decline" was due to any threat or wrongful use of fear by Yelp, as opposed to customer dissatisfaction, economic conditions, or a multitude of other possible factors. Id. 54. Likewise, C&D fails to allege how (or whether) any purported threats by Yelp caused it to receive "fewer customers" or harmed its "business reputation." Id. 73. Plaintiffs also cannot magically create standing by amending their pleading to add conclusory allegations that their non-specific injuries were the "result of Yelp's conduct." SAC 54, 73, 92, 105. Such generic allegations fail to establish standing absent specific, supporting facts. See Coal. for a Sustainable Delta v. Fed. Emergency Mgmt. Grp., 711 F. Supp. 2d 1152, 1157-59 (E.D. Cal. 2010) ("standing may be based on `non-conclusory factual content'"); see also Barnum Timber Co. v. U.S. Envtl. Prot. Agency, No. C 08-01988 WHA, 2008 WL 4447690, at *7 (N.D. Cal. Sept. 29, 2008) ("injury and causation requirements would be empty if such conclusory and unsupported allegations could alone confer standing"). At bottom, Non-Sponsor Plaintiffs allege that they experienced an unspecified decline in business that they speculate was connected to consumer reviews and Yelp's use of an automated tool to screen such reviews. For example, both Levitt and C&D contend that their "reputation" was harmed "due to the posting of negative reviews" by consumers before they declined to purchase advertising. SAC 54, 73 (emphasis added). Likewise, Levitt complains that various "positive" reviews were removed from Yelp's website before and after declining to advertise on Yelp and 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 that this somehow contributed to "fewer customers" and a "decrease" in revenues. Id. Yelp is squarely immune from claims like those asserted here that arise from the content of user reviews posted on its website under the Communications Decency Act ("CDA"), 47 U.S.C. 230(c), or from any editorial discretion (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 07-03967, 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 unlawful 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" or harm to their "reputation" and any "extortion" by Yelp. Like the Non-Sponsor Plaintiffs, Chan and Paver Pro do not (and cannot) allege that any "decline" in customers or harm to their "reputation" was the direct result of any extortion by Yelp. Instead, the Sponsor Plaintiffs rely on conclusory allegations that they suffered injury "as a result of Yelp's conduct" that are insufficient to establish standing, see supra p. 14, and complaints about "negative reviews" or the "removal or positive reviews" from which Yelp is immune as a matter of law. SAC 104-105; see supra. In addition to speculative claims of "lost business," Sponsor Plaintiffs make vague claims that they "lost money in advertising costs" paid to Yelp to purchase advertising. See, e.g., SAC 91, 104. But again, the Sponsor Plaintiffs fail to connect these payments to any threat or other unlawful conduct by Yelp. Although Plaintiffs allege that they paid advertising fees "to avoid Yelp's manipulation of [their] reviews . . . in a manner that did not comply with the Yelp Review Terms," they utterly fail to allege that Yelp threatened (or even implied) that it would manipulate the reviews of Sponsor Plaintiffs' businesses "in a manner that did not comply with Yelp Review Terms" or 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 otherwise, unless Plaintiffs purchased advertising. Id. 91, 104. Instead, Chan concedes that she declined to purchase advertising after her initial conversations with Yelp, and that she later purchased advertising after she contacted a Yelp salesperson who purportedly offered to "help her" in unspecified ways if she advertised. Id. 81. And, Paver Pro admits that it never spoke with anyone at Yelp about advertising at all. Id. 99. Because the Sponsor Plaintiffs utterly fail to allege any plausible, causal nexus between their payment of advertising fees and any threat of injury from Yelp, their claims must be dismissed for lack of standing. See supra p. 12. c. Plaintiffs Fail to Sufficiently 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 Plaintiffs also have failed to allege standing under the UCL. Following the enactment of 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 Proposition 64, a "private person has standing to sue [under the UCL] only if he or she has suffered injury in fact and has lost money or property as a result of such unfair competition." Mervyn's, 39 Cal. 4th at 227; Rubio v. Capital One Bank, 613 F.3d 1195, 1203-4 (9th Cir. 2010) (citing Birdsong v. Apple, Inc., 590 F.3d 955, 960 (9th Cir. 2009) ("to plead a UCL claim, the plaintiffs must show, consistent with Article III, that they suffered a distinct and palpable injury as a result of the alleged unlawful or unfair conduct")). Non-Sponsor Plaintiffs cannot satisfy the "lost money or property" element because they did not purchase advertising and fail to allege, as required, an outlay of funds, tied to any business dealings with Yelp. Clayworth v. Pfizer, Inc., 49 Cal. 4th 758, 788 (2010) ("intent of this change was to confine standing to those actually injured by a defendant's business practices and to curtail the prior practice of filing suits on behalf of `clients who have not used the defendant's product or service . . . or had any other business dealing with the defendant'") Plaintiffs' vague claims of "loss of sales, revenues and/or assets" and injury to "business reputation" (see supra pp. 12-13) also do not constitute "lost money or property" for purposes of UCL standing. See, e.g., Missing Link, Inc. v. Ebay, Inc., 2008 WL 1994886, at *8 (N.D. Cal. May 5, 2008) ("more than an expectation of profit" is required to constitute an injury in fact for the purpose of standing under 17200); United States v. Sequel Contractors, Inc., 402 F. Supp. 2d 1142, 1156 (C.D. Cal. 2005) (decline in the value of a business is not recoverable under UCL). Sponsor Plaintiffs also fail to allege that they did not receive the benefits of advertising that they contracted to receive from Yelp, and thus, their payment of advertising fees cannot constitute "money or property" sufficient for UCL standing. Birdsong, 590 F.3d at 961 (UCL claim denied for lack of standing when "not alleged that [plaintiffs] were deprived of an agreed-upon benefit in purchasing their iPods"). C. Plaintiffs Also Fail To State A Claim Under The UCL Plaintiffs also fail to state a valid claim under 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). Plaintiffs have withdrawn their earlier claims that Yelp engaged in "deceptive" sales practices and now base their 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 sole UCL claim on unsupported allegations of "extortion" and "attempted extortion." See, e.g., SAC 112, 121, 125. Because the Second Amended Complaint is devoid of facts that give rise to a plausible inference that Yelp engaged in conduct that is "unlawful" or "unfair" within the meaning of the UCL, Plaintiffs' UCL claim must be dismissed. 1. 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." In re Actimmune Mktg. Litig., No. C 08-02376 MHP, 2009 WL 3740648, at *15 (N.D. Cal. Nov. 6, 2009). "Thus, a violation of another law is a predicate for stating a cause of action under the UCL's unlawful prong." Id. Plaintiffs base their UCL claims on a contention that Yelp "attempted to and/or did in fact commit extortion" as defined in Cal. Penal Code 518, 519, 523 , 524 and the federal Hobbs Act (18 U.S.C. 1951). SAC 121. Because Plaintiffs fall well short of the requirements to plead extortion or attempted extortion, their claim under the UCL's "unlawful" prong must be dismissed. See, e.g., Actimmune, 2009 WL 3740648, at *15 (dismissing unlawful claims for failure to sufficiently allege violations of the predicate regulations under the "unlawful" prong of the UCL). a. Plaintiffs Fail to Allege That Yelp Engaged in a Threat of Unlawful Injury or Wrongful Use of Fear Most fundamentally, Plaintiffs do not (and cannot) point to a single instance of Yelp engaging in any threat of unlawful injury or wrongful use of fear, as required to demonstrate extortion or attempted extortion. An unlawful threat is an essential element of extortion and attempted extortion. See Mitchell v. Sharon, 59 F. 980, 982 (9th Cir. 1894); People v. Sales, 116 Cal. App. 4th 741, 751 (2004) (reversing attempted extortion conviction because "extortion requires a threat"). Specifically, extortion under California law consists of "obtaining of property from another, with his consent . . . induced by a wrongful use of force or fear," while attempted extortion requires an attempt to extort 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 money or property "by means of any threat."7 Cal. Penal Code 518 (extortion) & 524 (attempted extortion) (emphasis added). Likewise, 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 . . . ." 18 U.S.C. 1951(b)(2) (emphasis added). Because Plaintiffs do not allege the use of any force or violence, they must allege plausible facts that Yelp engaged in the wrongful use of fear to plead extortion or attempted extortion. In turn, the California Penal Code narrowly specifies that "fear, such as will constitute extortion" consists solely of fear that is induced by "a threat": (1) "to do an unlawful injury to the person or property of the individual th

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