Cats and Dogs Animal Hospital, Inc. v. Yelp! Inc.

Filing 80

CASE MANAGEMENT STATEMENT JOINT CASE MANAGEMENT STATEMENT filed by Cats and Dogs Animal Hospital, Inc.. (Fitzgerald, John) (Filed on 7/15/2010)

1 THE WESTON FIRM GREGORY S. WESTON (239944) 2 JACK FITZGERALD (257370) 888 Turquoise Street 3 San Diego, CA 92109 4 Telephone: [phone] Facsimile: [phone] 5 [e-mail] [e-mail] 6 BECK & LEE BUSINESS TRIAL 7 LAWYERS 8 JARED H. BECK (233743) ELIZABETH LEE BECK (233742) 9 28 West Flagler Street, Suite 555 Miami, FL 33130 10 Telephone: [phone] Facsimile: [phone] 11 [e-mail] 12 [e-mail]

COOLEY LLP MICHAEL G. RHODES (116127) ([e-mail]) MATTHEW D. BROWN (196972) ([e-mail]) BENJAMIN H. KLEINE (257225) ([e-mail]) 101 California Street, 5th Floor San Francisco, CA 94111-5800 Telephone: [phone] Facsimile: [phone] Attorneys for Defendant YELP! INC.

13 Attorneys for Plaintiffs and the Proposed Classes 14 UNITED STATES DISTRICT COURT 15 NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 16 17 18 CATS AND DOGS ANIMAL HOSPITAL, INC.; ASTRO APPLIANCE SERVICE; 19 BLEEDING HEART, LLC; CALIFORNIA FURNISHINGS, INC.; CELIBRÉ, INC.; J.L. 20 FERRI ENTERTAINMENT, INC.; LE 21 PETITE RETREAT DAY SPA, LLC; SAN FRANCISCO BAY BOAT CRUISES, LLC; 22 WAG MY TAIL, INC.; and ZODIAC RESTAURANT GROUP, INC., on behalf of 23 themselves and all others similarly situated, 24 25 26 27 28 v. YELP! INC., Defendant. Plaintiffs, Case No. 3:10-cv-02351 MHP Pleading Type: Class Action JOINT CASE MANAGEMENT STATEMENT Judge: Date: Time: The Hon. Marilyn Hall Patel July 19, 2010 2:00 p.m.

Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

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For the initial Case Management Conference ("CMC") set for July 19, 2010, Plaintiffs

2 Cats and Dogs Animal Hospital, Inc., et al. ("Plaintiffs") and Defendant Yelp! Inc. ("Yelp," 3 together with Plaintiffs, the "Parties") hereby submit this Joint Case Management Statement 4 pursuant to Federal Rule of Civil Procedure 26(f), Local Civil Rule 16-9, and the Standing Order 5 for All Judges of the Northern District of California entitled "Contents of Joint Case 6 Management Statement." 7 Pursuant to Federal Rule of Civil Procedure 26(f), the Parties held a telephonic meeting

8 of counsel on Thursday, April 8, 2010. Gregory S. Weston, Jared H. Beck, and Elizabeth Lee 9 Beck participated for Plaintiffs. Michael G. Rhodes, Matthew D. Brown, and Benjamin H. 10 Kleine participated for Yelp. 11 I. 12 JURISDICTION AND SERVICE The Court has jurisdiction under 28 U.S.C. § 1332(d)(2) (The Class Action Fairness Act).

13 There are no issues concerning personal jurisdiction or venue. 1 No parties remain to be served. 2 14 II. 15 16 17 STATEMENT OF CLAIMS AND DEFENSES A. Chronology of Facts ­ Plaintiffs' Statement 1. The Yelp.com Website & Yelp's Business Model

Yelp operates Yelp.com, a website consisting of an online directory of businesses in

18 multiple categories, like an online Yellow Pages. Although Yelp.com's mantra is "Real people. 19 Real reviews.", Yelp in fact leverages an inherent conflict of interest and manipulates the content 20 of its website in order to promote the sale of expensive advertising subscriptions to captive 21 businesses. 22 Each business listed on Yelp.com has a unique Yelp.com listing page, which provides

23 basic business information (such as address, phone number, and hours of operation), and user24 generated ratings (on a scale of 1-star to 5-stars; generally, 3-stars and below is considered a 25 negative rating) and reviews. Businesses become listed on Yelp.com when either (a) Yelp 26 27 28
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The action was originally brought in the Central District of California, but was transferred to this Court upon Yelp's motion (see Docket No. 56).
2

The Parties reserve the right to add additional parties until any cutoff date set by the Court. 1 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 employees or others working on behalf of Yelp or at Yelp's direction, create a new listing for a 2 business (usually around the time Yelp enters a new geographical market), (b) reviewers not 3 associated with Yelp create a listing for a business while, at the same time, becoming the first 4 person to review that business, or (c) a business creates its own listing. Once in the Yelp.com 5 directory, business may not opt out of being listed. 6 Yelp's content is primarily created by independent Yelp users, or reviewers. However,

7 Yelp also employs "Scouts" to write reviews. Scouts are individuals paid by Yelp to ostensibly 8 patronize businesses in a new geographic market and write reviews for those businesses. Yelp 9 also compensates a particular group of reviewers, deemed the Yelp "Elite Squad," for writing 10 reviews. These are individuals who are particularly active in the Yelp community. Individuals 11 must apply to Yelp to become Elite members. These "Elites" are then frequently invited to free 12 parties, dinners and other events, and provided with free alcohol, food and goods, as 13 compensation for their involvement in generating content on Yelp.com. Finally, Yelp personnel 14 have themselves occasionally written reviews (including false negative reviews) of businesses 15 listed on Yelp. 16 Yelp's primary stream of revenue is through the sale of advertising subscriptions to

17 businesses listed on Yelp.com. 18 19 2. Yelp's Extortionate & Unlawful Business Practices

Such subscriptions begin at a price of approximately $300/month and increase to $1,000

20 or more per month. A Yelp sales team working on commission is responsible for selling these 21 advertising subscriptions. In order to do so, Yelp sales employees promise to manipulate 22 business listing pages favorably to those businesses that purchase Yelp advertising, and threaten 23 to manipulate business listing pages detrimentally to those businesses that refuse to purchase 24 Yelp advertising. After making such promises and threats, Yelp in fact manipulates business 25 listing pages based on whether a business purchases or refused to purchase advertising. In 26 addition, Yelp enforces it Terms of Service disparately, depending upon whether a business is a 27 "Sponsor" (i.e., has purchased an advertising subscription) or not: reviews that violate Yelp's 28 2 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 Terms of Service are nevertheless frequently permitted to remain on the pages of businesses 2 which have refused to purchase Yelp advertising subscriptions. 3 4 3. Plaintiff-Specific Allegations & Procedural History

This putative class action was initially filed on February 23, 2010, in the Central District

5 of California, by Cats and Dogs Animal Hospital, Inc., a Long Beach, California veterinary 6 7 8 9 10 clinic. After defamatory negative reviews (which violated Yelp's Terms of Service) appeared on Cats and Dogs' Yelp.com listing page, Yelp sales employees contacted Cats and Dogs, offering to remove negative reviews in exchange for a payment of $300 per month for an advertising subscription. Shortly after Cats and Dogs refused, more false negative reviews appeared on Cats

11 and Dogs' Yelp.com listing page, which Yelp refused to remove although they violated Yelp's 12 Terms of Service. 13 Shortly after filing the action, Plaintiff and his counsel received communications from

14 hundreds of small businesses across the nation seeking to join the fight against Yelp, and sharing 15 similar stories of extortion and other unlawful behavior by Yelp. As a result, a First Amended 16 Complaint was filed in March, which added nine new representative plaintiffs, several new 17 factual allegations and claims, and which greatly detailed Yelp's extortionate scheme and other 18 unlawful practices. 19 20 21 B. Chronology of Facts ­ Yelp's Statement 1. Yelp's Website

Yelp operates a popular website, www.yelp.com (the "Yelp Website"), which allows

22 Yelp users (known as "Yelpers") to write reviews of local businesses and allows anyone to read 23 these reviews. Since 2004, Yelpers have written millions of reviews about every kind of local 24 business­­from restaurants and cafes to mechanics and dentists. Yelpers rate these businesses 25 on a scale of one to five stars. In May 2010, the Yelp website received more than 32 million 26 unique visitors, and since inception, Yelpers have written over 11 million local reviews. Over 27 85% of these reviews rate a business positively, i.e., three stars or higher. Nationwide, many 28 3 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 local businesses benefit from the positive attention they receive from Yelp and recognize Yelp as 2 a useful and unique marketing tool. 3 4 2. Yelp's Automated Review Filter

Not all reviews placed on Yelp's website are trustworthy. For example, some business

5 owners write themselves positive reviews, or write negative reviews of competitors (sometimes 6 opening sham accounts under a pseudonym to do so). Occasionally, disgruntled former The problem of

7 employees may attempt to unfairly criticize their former employers.

8 untrustworthy reviews permeates most online review websites, leading to artificial inflation or 9 deflation of a business's rating and, as a result, misled consumers. Yelp internally refers to less 10 trustworthy reviews as "spam," the same term often used to describe unwanted, "junk" email. 11 12 Filter." To combat this spam, Yelp uses proprietary and confidential software it calls the "Review The automated Review Filter attempts to identify, and filter out, less trustworthy

13 reviews. Reviews that are filtered out do not appear on a business's page, and are not used to 14 calculate a business's overall rating. The Review Filter impacts both positive and negative 15 reviews, and runs on a regular basis. As the circumstances surrounding any particular review 16 change over time (e.g., the Review Filter gleans new information about the review or the 17 reviewer), a review may be designated or undesignated as spam. Therefore, any review may be 18 unfiltered at one point in time, thus appearing on the business's Yelp page, and filtered at another 19 point in time, thus "disappearing" from the business's page. 3 Because a business's overall Yelp 20 rating is calculated using only unfiltered reviews, this rating may also change as reviews are 21 filtered or unfiltered. 22 23 3. Yelp's Advertising Offerings

Like many websites, Yelp sells advertisements to local businesses, which can appear on

24 the Yelp Website as "Sponsored Results" (clearly labeled as such) in response to certain 25 searches. Previously, as part of its advertising package, Yelp also offered businesses the option 26 to select a single "Favorite Review" (again, clearly labeled as such) to display prominently on 27 Independent of the automated Review Filter, a review may be manually removed if it violates 28 Yelp's Terms of Service or Review Guidelines, or if the author of the review removes it. The content of such reviews ceases to be visible anywhere on the Yelp Website. 4 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT
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1 the business's review page. Allowing a business to select a "Favorite Review" allowed a 2 business to choose a pre-existing third-party review to be highlighted on their Yelp page. 3 Choosing a "Favorite Review" did not remove any reviews from the business's Yelp page, add 4 any reviews, or affect a business's overall Yelp rating. Advertisers have received other benefits 5 at times, such as the ability to add a video to their business page. 6 7 8 C. Statements of Principal Factual Issues in Dispute 1. Plaintiffs' Statement

Yelp operates a small business review website that derives its revenue primarily from the

9 sale of "business sponsorship" of its review pages. Plaintiffs allege that Defendant's large 10 "sponsorship" sales force extorts business owners by manipulating or offering to manipulate its 11 pages in favor those who purchase costly advertising subscriptions from Yelp, and detrimentally 12 to businesses that refuse. Plaintiffs also allege that Yelp personnel write false reviews in 13 furtherance of this scheme, and that Yelp wields the Yelp Elite Squad--especially active 14 members of the Yelp community, who are frequently rewarded with free parties, alcohol, goods 15 and services--as an agent of coercion in furtherance of this scheme. Plaintiffs also allege that 16 Yelp enforces its Terms of Service in favor paid Sponsors, but frequently refuses to enforce the 17 Terms of Service for the benefit of businesses who do not purchase advertising. 18 19 The principal factual issues in dispute include: · Whether Yelp regularly offers, or has ever offered, to manipulate reviews, or a

20 business's Yelp listing page, in exchange for purchasing Yelp advertising services; 21 · Whether Yelp regularly threatens, or has ever threatened, to manipulate reviews, or a

22 business's Yelp listing page, in exchange for declining to purchase Yelp advertising services; 23 24 · Whether Yelp personnel regularly post, or have ever posted, false reviews; · Whether Yelp uses the Yelp Elite Squad as an agent to coerce businesses into

25 purchasing advertising subscriptions; and 26 27 28 5 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT · Whether Yelp differentially enforces its Terms of Service.

1 2 3 exists.

2.

Yelp's Statement

Yelp denies Plaintiffs' factual assertions. Plaintiffs look for a conspiracy where none Despite Plaintiffs' incendiary rhetoric, Yelp does not manipulate reviews to favor

4 advertisers or to disfavor non-advertisers. Nor are reviewers instructed in any way to favor 5 advertisers over non-advertisers. Plaintiffs' misunderstanding appears to stem from one of the 6 very features of Yelp that has made it the trusted source of reviews for over 30 million people a 7 month­­the automated Review Filter. Some business owners leap to the incorrect conclusion 8 that any fluctuations in their reviews are connected to whether they purchase or decline to 9 purchase advertising on Yelp. In reality, the automated Review Filter does not consider whether 10 a business is an advertiser or not when it filters a review. 11 Earlier this year, due to continued misunderstandings about the automated Review Filter,

12 Yelp made it possible for anyone to see the reviews that were filtered out, by clicking on a link at 13 the bottom of each business page. Yelp also eliminated the Favorite Review feature­­although 14 there was nothing improper about it--in order to prevent any misconception that a business that 15 advertised on Yelp could eliminate a review or add a review to its page. 16 Plaintiffs' other assertions are equally unfounded. The "Yelp Elite Squad"­­a program

17 Yelp created to recognize the most passionate Yelpers­­is not an agent of Yelp and is not 18 involved in the sale of Yelp advertising subscriptions. Yelp enforces its Terms of Service to the 19 benefit of consumers, advertisers, and non-advertisers, and Yelp's employees, like other Yelpers, 20 are expected to adhere to Yelp's Terms of Service and review guidelines. 21 III. 22 23 LEGAL ISSUES A. Plaintiffs' Statement

Plaintiffs assert their claims as counts for Civil Extortion and Civil Attempted Extortion,

24 Intentional Interference With Prospective Economic Advantage, and violations of the 25 "Unlawful," "Unfair," and "Fraudulent" prongs of the California Unfair Competition Law, Cal. 26 Bus. & Prof. Code § 17200 et seq. Plaintiffs also seek to certify two Classes pursuant to Fed. R. 27 Civ. P. 23. 28 6 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

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B.

Yelp's Statement

Yelp disagrees that Plaintiffs have stated a claim and intends to file a renewed motion to

3 dismiss the Complaint for failure to state a claim upon which relief can be granted. Yelp 4 previously filed a motion to dismiss the complaint in this matter in which Yelp made, inter alia, 5 the following arguments: 6 7 8 9 10 11 12 13 14 15 · · · · Plaintiffs lack standing under Cal. Bus. and Profs. Code § 17200 since they have not suffered injury in fact. See Walker v. GEICO Gen. Ins. Co., 558 F.3d 1025, 1027 (9th Cir. 2009) (§ 17200 standing is "limited . . . to individuals who suffer losses of money or property that are eligible for restitution"). Plaintiffs fail to satisfy Rule 9(b)'s heightened pleading requirements for claims grounded in misrepresentation or fraud. Plaintiffs' claim for extortion and attempted extortion fails as a matter of law because, among other reasons, (a) there is no right for a civil claim under the California Penal Code, and (b) there has been insufficient allegation of "wrongful use of fear" and of consent that was "coerced and unwilling." Plaintiffs' claim for intentional interference with prospective business advantage fails as a matter of law because Plaintiffs do not plead damages to their business goodwill or that the alleged interference was independently wrongful.

Yelp reserves the right to attack the Complaint or any future consolidated or amended

16 complaint on these or other legal grounds. Yelp also reserves the right to assert all applicable 17 defenses. 18 IV. 19 20 MOTIONS A. Prior Motions

Previously, Yelp moved to dismiss Plaintiffs' First Amended Complaint (Docket No. 22)

21 and that Motion was fully briefed (Docket Nos. 23, 27, 40, 51). Yelp also moved to transfer this 22 action from the Central District of California to the Northern District of California (Docket No. 23 25). That motion was granted (Docket No. 56). In light of the court's decision to transfer the 24 case, the court's minute entry stated that "the separate Motion to Dismiss filed by Defendant 25 Yelp!, Inc. (Docket No. 23) is moot and taken off calendar." Id. 26 Yelp also previously moved to consolidate this action with the related action titled

27 LaPausky v. Yelp! Inc., No. 2:10-cv-01340 VBF (C.D. Cal.) (Docket No. 26). That motion was 28 mooted by the voluntary dismissal of the LaPausky action (see Docket No. 55). 7 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

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Plaintiffs previously made a motion to compel Yelp's 30(b)(6) deposition and for

2 sanctions, together with a motion to shorten time for the briefing and hearing of those motions. 3 (Docket No. 66.) Plaintiffs subsequently filed an amended notice of their motion for sanctions 4 and to motion to compel, setting the motion for hearing on a regular schedule, with a hearing on 5 July 26, 2010. (Docket No. 69.) The Court vacated the hearing date and stated "the matter will 6 be taken up at the CMC on July 19 in connection with discovery plans, and not as a motion." 7 (Docket No. 76.) 8 9 B. Pending Motions

Yelp has moved to consolidate this action with the related action entitled Levitt v. Yelp!

10 Inc., No. 3:10-cv-01321-MHP (N.D. Cal.) ("Levitt"), currently pending before this Court 11 (Docket No. 64). Yelp's motion also requests that the Court order Plaintiffs to file a consolidated 12 complaint. Plaintiffs have opposed the motion and filed a cross-motion (Docket No. 65) seeking 13 the following relief: (1) designating this action as the lead action, and staying or dismissing the 14 Levitt action, or in the alternative consolidating the actions and deeming the Cats and Dogs First 15 Amended Complaint as the operative complaint; (2) appointing Plaintiffs' counsel as Interim 16 Class Counsel; and (3) submitting Yelp's fully-briefed Motion to Dismiss for hearing. 17 18 C. Anticipated Motions

Plaintiffs may move for a preliminary injunction and anticipate moving for summary

19 judgment upon the completion of discovery. 20 Yelp anticipates filing a motion to dismiss and/or strike the complaint or any

21 consolidated or amended complaint. Yelp may also file a motion to deny class certification, a 22 motion for summary judgment, and any necessary discovery motions. Yelp reserves the right to 23 file other motions if necessary. 24 V. 25 26 AMENDMENT OF PLEADINGS A. Per Plaintiffs

Plaintiffs do not anticipate amending their First Amended Complaint prior to a hearing on

27 Yelp's Motion to Dismiss. Plaintiffs may, if necessary, amend their pleading in light of the 28 Court's ruling on such a motion. Once the pleadings are settled, Plaintiffs may voluntarily 8 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 dismiss certain representative plaintiffs and/or may seek leave to amend their pleading to add 2 new representative Plaintiffs (but not new counts). 3 4 B. Per Yelp

In the event that this case and Levitt are consolidated, Yelp requests that a consolidated,

5 amended Complaint be filed. If this occurs, Yelp will respond to or move to dismiss the 6 consolidated amended complaint. 7 VI. 8 EVIDENCE PRESERVATION Plaintiffs' counsel have provided each plaintiff with a Document Preservation

9 Memorandum and have personally spoken to each representative plaintiff, providing further 10 instructions on the preservation and collection of documents and other evidence. Plaintiffs are 11 actively collecting and reviewing documents for production. 12 Yelp is aware of its obligation to preserve relevant evidence, including electronically

13 stored information, and has taken steps to comply with its obligations. 14 VII. 15 DISCLOSURES The Parties served their initial disclosures on April 19, 2010.

16 VIII. DISCOVERY 17 18 A. Discovery Taken to Date

Plaintiffs served, on April 21, 2010, their First Set of Requests for Production and First

19 Set of Interrogatories. Plaintiffs also served, on May 5, 2010, a Notice of Taking Rule 30(b)(6) 20 Deposition of Defendant. Yelp served, on April 23, 2010, First Sets of Requests for Production 21 to each of the named Plaintiffs. Yelp also served, on April 28, 2010, First Sets of Interrogatories 22 to each of the named plaintiffs. Both Parties have served objections and responses to the 23 requests for production and responses and objections to the interrogatories, and Yelp served 24 objections to Plaintiffs' deposition notice. The Parties have not yet met and conferred with 25 respect to the same. 26 27 28 9 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 2 3

B.

Scope of Anticipated Discovery 1. Per Plaintiffs

Plaintiffs anticipate seeking discovery on preliminary issues including, but not limited to,

4 Yelp's internal organization and document retention policies; Yelp's sales practices and policies; 5 Yelp's training supervision of sales employees; Yelp's "review filter"; financial information 6 relating to the sizes of the classes and incentives for manipulating their business listing pages; 7 complaints Yelp has received regarding its sales practices and its policies on these issues; its 8 policies relating to "Scouts" and the "Yelp Elite Squad"; payments to Yelp "Scouts"; and Yelp's 9 communications to business owners. 10 11 2. Per Yelp

Yelp's investigation and analysis of Plaintiffs' claims are ongoing. Presently, Yelp

12 anticipates that it will seek discovery on subjects including, but not limited to, the following: 13 Plaintiffs' communications with Yelp; present and historical reviews on Plaintiffs' Yelp page; 14 Plaintiffs' Yelp account(s); Plaintiffs' purchase of any online advertising services (from Yelp or 15 others); Plaintiffs' account information and reviews from any other online business review 16 websites; complaints made by Plaintiffs' customers about Plaintiffs' business; Plaintiffs' sales 17 and/or revenue and/or patronage statistics. 18 19 20 21 C. Changes to the F.R.C.P. and Local Rule Limits on Discovery 1. Timing of Discovery a. Per Plaintiffs

This action is already well into discovery, as noted in Section VIII(A), above. Both

22 parties have served document requests and interrogatories, and responses to the same. Plaintiffs 23 24 25 26 27 have already begun collecting and reviewing documents for production, and the parties have already agreed in principle to meet and confer with respect to each others' objections and responses. Yelp's request that discovery other than initial disclosures be deferred is, therefore, contrary to its behavior in fully participating in discovery to date. Moreover, Plaintiffs continue

28 to be tremendously harmed by Yelp's ongoing unlawful practices. In light of that harm, Plaintiffs 10 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 respectfully believe it is inappropriate to stay this action as the likelihood that it will be 2 dismissed outright is extremely minimal. 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 11 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT Moreover, the assertion that a defendant's proposed motion is potentially dispositive does not constitute good cause for staying discovery. "Discovery need not cease during the pendency of a motion to dismiss." SK Hand Tool Corp. v. Dresser Indus., Inc., 852 F.2d 936, 945 n.11 (7th Cir. 1988). Motions to stay discovery--even pending a potentially dispositive motion--"are disfavored because discovery stays may interfere with judicial efficiency and cause unnecessary litigation in the future." O'Neal v. NCO Fin. Sys., Inc., No. 06cv16, 2006 U.S. Dist. LEXIS 83505, at *4-5 (S.D. Cal. Nov. 16, 2006). A party seeking a discovery stay "carries a heavy burden of making a `strong showing' why discovery should be denied" by showing "a particular and specific need . . . as opposed to making stereotyped or conclusory statements." Skellerup Indus. v. City of Los Angeles, 163 F.R.D. 598, 600 (C.D. Cal. 1995) (citing Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975); Wright & Miller, Federal Practice and Procedure, § 2035). Where the defendant "merely urges that compliance with plaintiff's discovery request should be stayed pending the District Judge's ruling on its motion to dismiss. . . . [he] has done no more than to argue in conclusory fashion that its motion to dismiss will succeed. This idle speculation does not satisfy Rule 26(c)'s good cause requirement." Id. (citing Gray v. First Winthrop Corp., 133 F.R.D. 39, 40 (N.D. Cal. 1990). b. Per Yelp

The Parties have engaged in only limited discovery to date. As agreed to by counsel for plaintiff in Levitt, Yelp proposes that discovery should not proceed until the legal sufficiency of Plaintiffs' claims is determined. Thus, Yelp requests that, except for initial disclosures under Federal Rule of Civil Procedure 26(a), discovery be deferred until the pleadings have closed (i.e., until after any motions to dismiss are decided and, if necessary, Yelp has filed an Answer in this action).

1 2 3

2.

Bifurcation of Discovery a. Per Plaintiffs

Plaintiffs do not oppose bifurcating discovery so that class certification discovery comes

4 before merits discovery, so long as there is sufficiently broad discovery on all issues affecting 5 class certification. Plaintiffs agree to meet and confer in good faith on disagreements to 6 determine appropriate limits to class discovery. 7 8 b. Per Yelp

Yelp proposes that discovery (including depositions) should be bifurcated, with discovery

9 on matters not bearing on class certification issues to be conducted only after the Court issues a 10 decision on class certification. Phased discovery of this sort (precertification discovery first, 11 followed later by merits discovery) is contemplated by the Manual for Complex Litigation (see, 12 e.g., §§ 21.11, 21.14), which states that allowing full merits discovery before a decision on 13 certification "can create unnecessary and extraordinary expense and burden" (id. § 21.14). Yelp 14 recognizes that the line between merits and class discovery is not always easy to delineate and 15 agrees to meet and confer in good faith on disagreements to determine appropriate limits to class 16 discovery. 17 18 3. Modification to Discovery Rules

In light of the number of named plaintiffs in this case (10), the Parties agree that the limit

19 of 10 depositions set forth in Federal Rule of Civil Procedure 30 be modified for this case. The 20 Parties agree that Defendant Yelp, and the named Plaintiffs, should be permitted to take a total of 21 20 depositions per side (excluding expert depositions), without prejudice to the Parties mutually 22 agreeing to further modify the number of depositions, and without prejudice to either party 23 seeking leave of the Court to take additional depositions if they believe it is necessary to do so 24 (for example, if more named plaintiffs are added). 25 The Parties agree that, in the event the Cats and Dogs and Levitt actions are not

26 consolidated, plaintiffs in both cases should coordinate depositions so that Yelp's employees are 27 not subject to multiple depositions or duplicative Rule 30(b)(6) topics and questions. Plaintiffs' 28 12 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 position is that although there should be coordination, each set of plaintiffs in the two cases 2 should be entitled to take a full seven-hour deposition of each witness. 3 4 5 IX. 6 7 D. Proposed Discovery Plan

See "Scheduling," Section XVII, below. CLASS ACTIONS A. Plaintiffs' Statement

Before filing their motion for class certification, Plaintiffs anticipate serving written

8 discovery and taking depositions of Yelp management and sales employees directed to class 9 certification issues. Plaintiffs do not anticipate but reserve their right to designate an expert on 10 class certification issues. Plaintiffs propose, therefore, that discovery on class certification issues 11 proceed for a period of four (4) months, ending on November 25, 2010, after which Plaintiffs 12 will file their Motion for Class Certification no later than December 1, 2010. Yelp will have 13 three (3) weeks in which to oppose the Motion (Opposition due no later than December 22, 14 2010), and Plaintiffs will have two (2) weeks in which to reply (Reply due January 5, 2011). 15 16 B. Yelp's Statement

Yelp denies that a class should be certified in this action and will oppose any motion for

17 class certification. 18 X. 19 RELATED CASES The Court has ordered this case and Levitt v. Yelp! Inc., No. 3:10-cv-01321-MHP (N.D.

20 Cal.), to be related. There is a related case pending in California Superior Court, County of San 21 Francisco, titled Gelareh Rahbar and Rahbar Dentistry, PC v. Yelp! Inc., No. CGC 10 499227. 22 XI. 23 24 RELIEF A. Plaintiffs' Statement

Plaintiffs seek injunctive relief, equitable relief, damages, punitive damages, and costs,

25 expenses and reasonable attorneys' fees. 26 27 1. Injunctive Relief

Plaintiffs seek to permanently enjoin Yelp from engaging in the unlawful practices

28 complained of, i.e., the extortion of small business owners, and the manipulation of their Yelp 13 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 listing pages as a means to coerce business owners to purchase advertising subscriptions from 2 Yelp. Plaintiffs may seek this general injunctive relief through any, or several, specific means, 3 including, but not limited to: (A) requiring Yelp to allow businesses to "opt out" of being listed 4 on Yelp; (B) requiring Yelp to implement or discontinue certain business policies and controls; 5 (C) preventing Yelp personnel from posting reviews; (D) preventing Yelp from compensating 6 Yelp Elite Squad Members for reviewing businesses; (E) limiting the manner in which the 7 "review filter" identifies and removes purportedly "untrustworthy" reviews; (F) limiting the 8 ability of Yelp personnel to manually manipulate business listing pages; (G) requiring Yelp to 9 uniformly enforce its Terms of Service; (H) requiring Yelp to respond to complaints about 10 violations of its Terms of Service within a certain time; (I) requiring Yelp to establish means of 11 live communication with a person; and (J) monitoring Yelp's compliance with any such Court 12 Order. 13 14 2. Equitable Relief

Plaintiffs seek an Order compelling Yelp to disgorge all monies, revenues and profits

15 obtained by means of its unlawful acts and practices. Specifically, Plaintiffs seek, without 16 limitation, the disgorgement of monies, revenues and profits obtained from the Sponsor Class 17 members, who agreed to purchase Yelp advertising because of Yelp's threats to detrimentally 18 manipulate their pages if they refused. 19 20 3. Damages

Plaintiffs will seek damages in an amount to be determined at trial. Plaintiffs have not yet

21 calculated damages but seek damages on the basis of Yelp's intentional interference with 22 Plaintiffs' and the Class Members' prospective economic advantages. 23 24 4. Punitive Damages

Plaintiffs will seek punitive damages based on Yelp's malicious, fraudulent and willful

25 conduct. 26 27 5. Costs, Expenses and Reasonable Attorneys Fees

Plaintiffs will seek their costs and expenses in bringing this action, along with their

28 reasonable attorneys' fees. 14 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 2

B.

Yelp's Statement

Yelp does not currently anticipate any counterclaims but reserves the right to add such

3 counterclaims in the event that facts arise to support them. Yelp denies that Plaintiffs are entitled 4 to any equitable relief, damages, costs, or fees. 5 Yelp will oppose any motion for injunctive relief by Plaintiffs, including the extraordi-

6 nary and unprecedented proposed injunctive relief described above. 7 XII. 8 9 SETTLEMENT AND ADR A. General Statement

Pursuant to the Court's ADR Order (Docket No. 58), the parties were given until August

10 19, 2010 to meet and confer with respect to the ADR process selection. Upon meeting and 11 conferring in the context of filing this Joint Case Management Statement, the parties were unable 12 to agree to a particular ADR process (see each party's statement below). Thus, pursuant to ADR 13 L.R. 3-5(c), the Parties will file a Notice of Need for ADR Telephone Conference. Pursuant to 14 ADR L.R. 3-5(e), the Court may discuss with the Parties the selection of an option at the 15 conference. 16 17 B. Per Plaintiffs

Plaintiffs prefer Early Neutral Evaluation (ADR L.R. 5) for a variety of reasons,

18 including the belief that there is a greater likelihood of settlement where each party is required to 19 have present an individual with the authority to settle; that there is great value in having the 20 Court provide a neutral evaluation of the case to the parties; and because ENE is cost efficient. 21 22 C. Per Yelp

Yelp prefers to submit to non-judicial private mediation, with such mediation to be held

23 within 45 days of a decision on a class certification motion. 24 XIII. CONSENT TO MAGISTRATE JUDGE FOR ALL PURPOSES 25 The Parties do not consent to have a magistrate judge conduct all further proceedings

26 including trial and entry of judgment. 27 28 15 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 XIV. OTHER REFERENCES 2 The Parties do not believe, at this time, that this case is suitable for reference to binding

3 arbitration, a special master, or the Judicial Panel on Multidistrict Litigation. 4 XV. 5 NARROWING OF ISSUES The Parties believe there may be opportunity and means to narrow the issues and/or the

6 presentation of evidence at trial, but believe that it is too early now to predict how that may be 7 accomplished. The Parties will work together to determine ways in which issues may be 8 narrowed through agreement and/or motion practice. 9 XVI. EXPEDITED SCHEDULE 10 The Parties do not believe this is the type of case that can be handled on an expedited

11 basis with streamlined procedures. 12 XVII. SCHEDULING 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A. Plaintiffs' Proposed Schedule
Event Opening of Class Certification Discovery Completion of Class Certification Discovery (Including Any Expert Discovery) Opening of Merits Discovery Deadline for Plaintiffs To File Motion for Class Certification Deadline for Defendant To File Opposition to Motion for Class Certification Deadline for Plaintiffs to File Reply in Support of Motion for Class Certification Hearing on Motion for Class Certification Closing of Merits Discovery Designation of Experts Closing of Expert Discovery Deadline For Filing Dispositive Motions Immediately November 25, 2010 November 26, 2010 December 1, 2010 December 22, 2010 January 5, 2011 January 12, 2011 / At Court's Convenience April 1, 2011 May 1, 2011 July 1, 2011 August 1, 2011 Plaintiffs

16 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hearing on Dispositive Motions Pretrial Conference Trial

September 19, 2011 / At Court's Convenience November 7, 2011 December 5, 2011

B.
Event

Yelp's Proposed Schedule
Deadline

Opening of Initial Phase of Fact Discovery should be bifurcated into class certification and merits Discovery discovery. Class certification discovery would commence after the pleadings have closed (i.e., after any motions to dismiss have been decided and, if necessary, Yelp has filed an Answer). Completion of Class Certification Six months from commencement of class certification discovery Fact Discovery Completion of Class Certification Two months after completion of class certification fact discovery. Expert Discovery(If Any) During this period, the following will occur on a schedule to be worked out by the parties: disclosure of experts, service of initial expert reports, rebuttal reports, and depositions. Deadline to File Any Motion for or If expert discovery takes place, then two months and two weeks to Deny Class Certification after completion of class certification fact discovery. If there is no expert discovery, then two weeks after completion of class certification fact discovery or two weeks after the Parties have confirmed that there will be no expert discovery, whichever is later. Deadline to File Any Opposition to Two months and eight weeks after completion of class Motion for Class Certification certification fact discovery. Deadline to file Any Reply on Twenty-one days after filing of opposition to motion for class Motion for Class Certification certification. Class Certification Hearing At the Court's convenience Completion of Fact Discovery Six months after order on motion for class certification Completion of Expert Discovery Three months after completion of fact discovery. Includes disclosure of experts, service of initial expert reports and rebuttal reports, and depositions on dates to be agreed upon by the Parties. Deadline for Dispositive Motions Two months from completion of expert discovery (Including Daubert Motions) Hearing on Dispositive Motions At the Court's convenience Pre-Trial Conference Trial One month after Court's ruling on dispositive motions, or as soon as possible based on the Court's schedule Two weeks after Pre-Trial Conference

25 XVIII. TRIAL 26 The Parties anticipate that the case will be tried to a jury and is likely to last

27 approximately 10 court days. 28 17 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 XIX. DISCLOSURE OF NON-PARTY INTERESTED ENTITIES OR PERSONS 2 Plaintiffs filed their Certification and Notice of Interested Parties on March 1, 2010

3 (Docket No. 2), and March 16, 2010 (Docket No. 11) identifying Cats and Dogs Animal 4 Hospital, Inc., Astro Appliance Service, Bleeding Heart, LLC d/b/a Bleeding Heart Bakery, 5 California Furnishings, Inc. d/b/a Sofa Outlet, Celibré, Inc., J.L. Ferri Entertainment, Inc. d/b/a 6 Adult Socials, Le Petite Retreat Day Spa, LLC, San Francisco Bay Boat Cruises, LLC d/b/a 7 Mermaids Cruise, Wag My Tail, Inc., and Zodiac Restaurant Group, Inc. d/b/a Scion Restaurant, 8 as having a direct, pecuniary interest in the outcome of the case. 9 Pursuant to Civil Local Rule 3-16, Yelp filed its Certificate of Interested Entities or The following listed persons, firms, partnerships, corporations

10 Persons on July 15, 2010.

11 (including parent corporations) or other entities have either (i) a financial interest in the subject 12 matter or controversy; or (ii) any other kind of interest that could be substantially affected by the 13 outcome of the proceeding: Jeremy Stoppelman (co-founder and Chief Executive Officer of 14 Yelp), Russel Simmons (co-founder and former Chief Technology Officer of Yelp), Geoff 15 Donaker (Chief Operation Officer of Yelp), Max Levchin (Investor), Bessemer Venture Partners 16 (Investor), DAG Ventures (Investor), Elevation Partners LP (Investor), and Admiral Insurance 17 Company (Insurance Carrier). Yelp had previously filed, on March 24, 2010 (see Docket No. 18 15-5) a Certification as to Interested Parties pursuant to the Central District of California local 19 rule. 20 21 22 23 24 25 26 27 28 18 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT

1 XX. 2

OTHER MATTERS The Parties agree that a protective order should be entered governing the production of

3 confidential documents and information, and that such protective order should include a 4 "clawback" agreement for privileged materials. The Parties will meet and confer to submit a 5 protective order for the Court's consideration. 6 [Per Plaintiffs] Plaintiffs sent a proposed Stipulation Governing Electronic Discovery to

7 Yelp for review. Plaintiffs would anticipate that the parties would meet and confer, and that they 8 may wish to submit such a stipulation and proposed order for the Court's consideration. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 Cats and Dogs Animal Hospital, Inc.et al. v. Yelp! Inc., Case No. 3:10-cv-02351 MHP JOINT CASE MANAGEMENT STATEMENT Dated: July 15, 2010 THE WESTON FIRM Respectfully Submitted, Dated: July 15, 2010 COOLEY LLP

/s/ Matthew D. Brown Matthew D. Brown (196972) Attorneys for Defendant YELP! INC.

/s/ Jack Fitzgerald Jack Fitzgerald (257370) Attorneys for Plaintiffs