Boris Levitt v. Yelp! Inc. , 765 F.3d 1123 ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BORIS Y. LEVITT, on behalf of No. 11-17676
himself and all others similarly
situated, DBA Renaissance D.C. Nos.
Restoration; CATS AND DOGS 3:10-cv-01321-EMC
ANIMAL HOSPITAL, INC.; TRACY 3:10-cv-02351-EMC
CHAN, DBA Marina Dental
Care; JOHN MERCURIO, DBA
Wheel Techniques, OPINION
Plaintiffs-Appellants,
v.
YELP! INC.,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Edward M. Chen, District Judge, Presiding
Argued and Submitted
July 11, 2013—San Francisco, California
Filed September 2, 2014
Before: Richard A. Paez, Marsha S. Berzon,
and Richard C. Tallman, Circuit Judges.
Opinion by Judge Berzon
2 LEVITT V. YELP! INC.
SUMMARY*
California Unfair Competition Law / Civil Extortion
The panel affirmed the district court’s dismissal of an
action by small business owners alleging that Yelp! Inc.
extorted or attempted to extort advertising payments from
them by manipulating user reviews and penning negative
reviews of their businesses in violation of California state
law.
The panel held that the business owners failed to state a
claim for extortionate, and therefore unlawful, business
practices in violation of California’s Unfair Competition Law
because, under the Hobbs Act and California law, unless a
person has a pre-existing right to be free of the threatened
economic harm, threatening economic harm to induce a
person to pay for a legitimate service is not extortion. The
panel held that, given these stringent requirements, the
business owners failed sufficiently to allege that Yelp
wrongfully threatened economic loss by manipulating user
reviews. In addition, the business owners did not allege
sufficient facts to support their claim that Yelp authored
negative user reviews of their businesses.
The panel held that the business owners also failed to
state a claim for unfair business practices in violation of the
UCL.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
LEVITT V. YELP! INC. 3
In addition, the business owners failed to state a claim for
civil extortion or attempted civil extortion under California
law.
COUNSEL
Lawrence Dale Murray (argued), John Henning III, and
Robert C. Strickland, Murray & Associates, San Francisco,
California, for Plaintiffs-Appellants.
S. Ashlie Beringer (argued) and Molly Cutler, Gibson Dunn
& Crutcher, Palo Alto, California; Gail Ellen Lees, Gibson
Dunn & Crutcher, Los Angeles, California; and Aaron Schur,
Yelp Inc., San Francisco, California, for Defendant-Appellee.
OPINION
BERZON, Circuit Judge:
Today, individuals can share their opinions with the entire
world courtesy of a few taps on the keyboard. The appellee
in this case, Yelp! Inc. (“Yelp”), provides an online forum on
which its users express opinions as to services ranging from
dog walkers to taco trucks.
The appellees, Boris Levitt, Cats and Dogs Animal
Hospital, Inc. (“Cats and Dogs”), John Mercurio, and Dr.
Tracy Chan, are small business owners (collectively, “the
business owners”) who allege that Yelp extorted or attempted
to extort advertising payments from them by manipulating
user reviews and penning negative reviews of their
businesses. The business owners filed a class-action lawsuit
4 LEVITT V. YELP! INC.
against Yelp for violations of California’s Unfair Competition
Law (“UCL”), California Business & Professions Code
§ 17200 et seq., civil extortion, and attempted civil extortion.
The district court dismissed the lawsuit for failure to state
a claim. We review the dismissal de novo, see Wilson v.
Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012),
and, holding that the facts and legal theories alleged in the
business owners’ complaint are insufficient to make out a
prima facie case of unlawful or unfair business practices
against Yelp, affirm.
I.
A. Yelp’s Service
Yelp provides an online directory that allows registered
users to post reviews and rank businesses on a scale of one to
five stars. Based on these user rankings, Yelp then assigns
businesses an overall “star” rating. Businesses cannot opt out
of being listed on Yelp.
Not all user reviews submitted appear on a business’s
Yelp page or remain there after initially appearing. Reviews
can be removed by the reviewer, removed by Yelp for
violating Yelp’s “Review Guidelines” or “Terms of Service,”
or removed by an automated filtering software maintained by
Yelp. According to Yelp’s website, its filtering system
operates as follows:
Th[e] system decides how established a
particular reviewer is and whether a review
will be shown based on the reviewer’s
involvement on Yelp. While this may seem
LEVITT V. YELP! INC. 5
unfair . . . this system is designed to protect
both consumers and businesses alike from
fake reviews (i.e., a malicious review from a
competitor or a planted review from an
employee). The process is entirely automated
to avoid human bias, and it affects both
positive and negative reviews. It’s important
to note that these reviews are not deleted (they
are always shown on the reviewer’s public
profile) and may reappear on your business
page in the future.
Yelp also offers businesses advertising opportunities on
its website for $300 to $1200 per month. Purchasing
advertising allows a business to: appear in advertisements
displayed above Yelp search results and on related business
pages; prevent competitors’ advertisements from appearing
on its Yelp page listing; enhance its page listing with photos;
and promote a favorite review to the top of its page.1
B. The Allegations Against Yelp
The business owners maintain that Yelp created negative
reviews of their businesses and manipulated review and
ratings content to induce them to purchase advertising
through Yelp. They urge that Yelp has thereby violated the
UCL through acts of extortion and, when not successful in
inducing payments to Yelp, attempted extortion. They also
1
Yelp states that the specific benefits of advertising “have changed
somewhat over time.” For example, Yelp no longer permits businesses to
highlight a “favorite review” and now offers a “video feature” for
advertisers’ Yelp pages.
6 LEVITT V. YELP! INC.
allege separate causes of action for civil extortion and
attempted civil extortion.
The business owners seek to represent two subclasses of
businesses: those that declined to advertise with Yelp
(“nonsponsors”), and those that have, at some point,
purchased advertising (“sponsors”). They support their
claims by alleging that “approximately 200 Yelp employees
or individuals acting on behalf of Yelp have written reviews
of businesses on Yelp” and that Yelp’s Chief Executive
Officer admitted to a New York Times reporter that Yelp has
paid users to write reviews, although it does not do so directly
anymore.
The Third Amended Complaint contains the following
plaintiff-specific allegations:
a. Boris Levitt
Levitt, the owner of a furniture restoration business,
alleged that several positive reviews disappeared from his
business’s Yelp page, causing the overall star rating of his
business to decline. Levitt contacted Yelp to ask why a
certain positive review had disappeared from his business’s
page and was told by a Yelp agent that she could not assist
him.
Two months later, a Yelp sales representative contacted
Levitt to invite him to advertise with Yelp. Levitt declined,
stating that he already had a “high volume of users reviewing
his business page” and “an overall rating of 4.5 stars.”
According to Levitt, two days after he declined to
purchase advertising, several five-star reviews disappeared
LEVITT V. YELP! INC. 7
from his page, leaving his business with an overall star rating
of three-and-a-half stars. Levitt asserted that “Yelp
manipulated the reviews of [his] business because he did not
purchase advertising,” and did so “as a threat” made to induce
him to purchase advertising. As a result of the lower overall
rating, Levitt alleged, his business reputation and revenues
declined.
b. Cats and Dogs Animal Hospital
Cats and Dogs is an animal hospital in Santa Barbara. Its
allegations center on reviews from two negative users.
Cats and Dogs contacted Yelp to request removal of the
first negative review, posted by Yelp user “Chris R.,” because
the review referred to a visit that occurred outside of Yelp’s
twelve-month policy. That review was subsequently
removed, but another negative review from a different user,
“Kay K.,” showed up soon afterwards on the Cats and Dogs
Yelp page.
Cats and Dogs states that “soon after the appearance of
these negative reviews, [it] began receiving frequent, high-
pressure calls from Yelp sales representatives, who promised
to manipulate [Cats and Dogs’] listing page in exchange for
[Cats and Dogs’] purchasing . . . advertising.” Cats and Dogs
alleged it received a call from a Yelp sales representative who
stated that Yelp would “hide negative reviews” or “place
them lower on [Cats and Dogs] listing page” if Cats and Dogs
purchased advertising. Cats and Dogs declined. According
to Cats and Dogs, a week after it rejected this particularly
explicit advertising pitch, the Chris R. review reappeared,
followed by a second negative review from Kay K. Cats and
Dogs alleged that “Yelp re-posted the ‘Chris R’ and two ‘Kay
8 LEVITT V. YELP! INC.
K’ reviews and/or manufactured its own reviews to instill fear
in [Cats and Dogs] to advertise.” Cats and Dogs further
alleged that “[a]s a result of Yelp’s conduct,” Cats and Dogs’
business revenues and reputation were injured.
c. Mercurio
Mercurio owns Wheel Techniques, an automobile body
repair shop. He alleged that Yelp posted “false reviews,”
meaning reviews not composed by actual customers, “as a
threat to induce Wheel Techniques to advertise.” He based
his allegation on the appearance of “negative reviews . . . on
Wheel Techniques’ Yelp review page” that did not
correspond to customer records and contemporaneous
“telephone calls from Yelp requesting that [Wheel
Techniques] purchase advertising.”
Mercurio stated that he “called Yelp to inquire about why
one of his competitors, known in the industry for its ‘shotty
[sic] work,’” had a high overall star rating. Yelp allegedly
responded that the competitor advertised and that “[Yelp]
work[s] with your reviews if you advertise with us.” Later,
when Mercurio declined an offer to advertise on Yelp, he
alleges that “[w]ithin minutes,” “a one-star review was
moved to the top of [Wheel Techniques’] Yelp review page
. . . as a threat to cause Wheel Techniques to fear that if it did
not pay Yelp money to advertise, the negative review would
remain at the top of its Yelp review page.”
Mercurio also alleged that he “was told . . . that a former
Yelp employee stated that Yelp . . . terminated a group of
sales employees . . . as a result of scamming related to
advertising.” The Third Amended Complaint does not
indicate who told Mercurio this information, nor does it
LEVITT V. YELP! INC. 9
identify the Yelp employee who allegedly made the original
statement or of what the “scamming related to advertising”
consisted.
d. Dr. Tracy Chan
Chan, a dentist, stated that she received calls from a Yelp
sales representative “offer[ing] her lots of benefits, such as
the opportunity to keep Chan’s business ratings high by
hiding or burying bad reviews,” if she advertised with Yelp.
According to Chan, the sales representative stated that
“although many Yelp reviews were manipulated by a
computer system, Yelp employees also had the ability to
remove reviews from a business’s Yelp page.”
Chan initially declined to purchase advertising from Yelp.
Two or three days after doing so, “Yelp removed nine 5-star
reviews” from her page, causing her overall rating to drop
from five to three stars. Chan called Yelp to ask about the
decline in her overall rating, and was told that “Yelp ‘tweaks’
the ratings every so often and that [Yelp] could help her if she
signed up for advertising services with Yelp.” Chan alleged
that “Yelp removed positive reviews . . . as a threat to cause
Chan to fear that if she did not purchase advertising . . . her
business’s overall star rating would stay low.”
“[O]ut of fear of further manipulations,” Chan signed an
advertising contract with Yelp. According to Chan, just days
after signing the contract, her “overall rating increased to 4
stars and various five star reviews were reinstated by Yelp.”
She believes the rating increase was the result of her agreeing
to advertise with Yelp.
10 LEVITT V. YELP! INC.
Several months later, a Yelp sales agent asked Chan
whether she was interested in increasing her advertising
purchase with Yelp. When Chan declined, she “noticed that
her reviews were again declining.” That same month, Chan
cancelled her existing advertising contract with Yelp. Chan
alleged that after she cancelled, “Yelp removed positive
reviews . . . and replaced them with negative reviews . . . to
cause Chan to fear that if she did not pay Yelp for
advertising, Yelp would continue to remove positive reviews
from her [page].”
Chan’s overall rating fluctuated over the next year and a
half. She attributed dips in her rating to specific interactions
with Yelp. For example, Chan stated that Yelp “removed
several positive reviews,” prompting her to “post a negative
review about Yelp’s conduct” on her Yelp page. “Within two
to three days,” she alleged, Yelp removed more positive
reviews, causing her overall rating to “[fall] to 3 stars.” Over
a year later, Chan alleged that her overall rating fell again,
this time from four stars to three and a half stars, when “Yelp
removed six positive reviews” from her page after she
“posted a negative review about Yelp to her own website.”
Chan asserted that the removal of positive reviews was done
“to induce [her] to pay for advertising and/or to discourage
her from posting negative information about Yelp.”
C. District Court’s Rulings
The district court dismissed the business owners’ Second
Amended Complaint for failure to state a claim upon which
relief could be granted. With respect to the business owners’
claim that Yelp’s conduct violated California’s UCL, the
district court ruled that: theories of extortion for failure to
remove negative user reviews were covered by Yelp’s
LEVITT V. YELP! INC. 11
immunity under the Communications Decency Act of 1996
(“CDA”), 47 U.S.C. § 230(c)(1); there were insufficient facts
from which to infer that Yelp authored or manipulated the
negative reviews and ratings; and there were insufficient
factual allegations from which to infer communication of an
extortionate threat.
After the business owners amended their complaint to fix
these deficiencies, the district court again dismissed it for
failure to state a claim. Describing the allegations that Yelp
manufactures negative reviews as “entirely speculative,” the
district court concluded that the Third Amended Complaint
failed to allege facts sufficient to support a conclusion that
Yelp authored content. Even assuming Yelp employees had
authored reviews, the district court found only “a mere
possibility” that Yelp authored content to extort advertising
payments. The district court further found that “allegations
based on Yelp’s purported manipulation of user-generated
content” were immunized by the CDA. The separate civil
extortion and attempted civil extortion claims failed for the
same reasons.
This appeal followed.
II.
The business owners maintain that Yelp attempted to
extort and did extort advertising payments from them by
wrongfully threatening them with economic loss. We hold
that the business owners have failed to state a claim under
California law on which relief can be granted. Accordingly,
we do not address Yelp’s defense of immunity under the
CDA.
12 LEVITT V. YELP! INC.
A. California’s Unfair Competition Law
California’s Unfair Competition Law prohibits “any
unlawful, unfair or fraudulent business act or practice and
unfair, deceptive, untrue or misleading advertising.” Cal.
Bus. & Prof. Code § 17200. “[I]t establishes three varieties
of unfair competition — acts or practices which are unlawful,
or unfair, or fraudulent.” Cel-Tech Commc’ns, Inc. v. L.A.
Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999) (internal
quotation marks omitted).
In prohibiting “any unlawful” business practice, the UCL
“borrows violations of other laws and treats them as unlawful
practices that the unfair competition law makes independently
actionable.” Id. (internal quotation marks omitted); see also
Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1168 (9th
Cir. 2012). The business owners premise their “unlawful”
UCL claim on Yelp’s allegedly extortionate conduct.
Specifically, they allege that the following conduct
amounts to extortion: (1) Yelp manipulating user-generated
reviews to induce them to buy advertising; and (2) Yelp
creating its own negative reviews of their businesses to
induce them to buy advertising. They do not assert any
claims based on failure to remove negative third-party
reviews of their businesses.
We conclude, first, that Yelp’s manipulation of user
reviews, assuming it occurred, was not wrongful use of
economic fear, and, second, that the business owners pled
insufficient facts to make out a plausible claim that Yelp
authored negative reviews of their businesses. Accordingly,
we agree with the district court that these allegations do not
support a claim for extortion.
LEVITT V. YELP! INC. 13
B. Unlawful (Extortionate) Business Practices
We first consider whether the business owners have stated
a claim of extortionate, and therefore unlawful, business
practices under California’s UCL.
1
The Hobbs Act defines extortion as “the obtaining of
property from another, with his consent, induced by wrongful
use of actual or threatened force, violence, or fear, or under
color of official right.” 18 U.S.C. § 1951(b)(2) (emphasis
added). Threats of economic harm made to “obtain[] . . .
property from another,” id., are not generally considered
“wrongful,” id., where the alleged extortioner has a legitimate
claim to the property obtained through such threats.
Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d
494, 523 (3d Cir. 1998). Therefore, unless a person has a pre-
existing right to be free of the threatened economic harm,
threatening economic harm to induce a person to pay for a
legitimate service is not extortion. See United States v. Vigil,
523 F.3d 1258, 1265 (10th Cir. 2008) (citing United States v.
Enmons, 410 U.S. 396, 400 (1973)); Viacom Intern. Inc. v.
Icahn, 747 F. Supp. 205, 213 (S.D.N.Y. 1990).
Enmons is the starting point for the interpretation of
“wrongful” in the extortion statute. 410 U.S. 396 (1973).
Enmons held that the use of violence in a labor strike to
obtain higher wages and other benefits did not constitute
extortion under the Hobbs Act. Id. at 400. In so holding,
Enmons explained that “[t]he term ‘wrongful,’ which . . .
modifies the use of each of the enumerated means of
obtaining property — actual or threatened force, violence, or
fear — would be superfluous if it only served to describe the
14 LEVITT V. YELP! INC.
means used.” Id. at 399. “Rather, ‘wrongful’ . . . limits the
statute’s coverage to those instances where the obtaining of
the property would itself be ‘wrongful’ because the alleged
extortionist has no lawful claim to that property.” Id. at 400.
Thus, Enmons concluded that the “[Hobbs] Act does not
apply to the use of force to achieve legitimate labor ends.”
Id. at 401. Enmons’ reasoning “created the claim of right
defense to charges of extortion under the Hobbs Act.” United
States v. Sturm, 870 F.2d 769, 772 (1st Cir. 1989).
As to violent threats, we have “declined to extend Enmons
beyond the context of a labor dispute,” United States v.
Daane, 475 F.3d 1114, 1119 (9th Cir. 2007), “read[ing]
Enmons as holding only that the use of violence to secure
legitimate collective bargaining objectives is beyond the
reach of the Hobbs Act,” United States v. Thordarson,
646 F.2d 1323, 1327 (9th Cir. 1981). We have also
recognized that, aside from violence, “some attempts to
obtain property . . . are so inherently wrongful that whether
the defendant had a lawful claim to the property demanded is
not relevant in determining whether extortion or attempted
extortion has been proven.” United States v. Villalobos,
748 F.3d 953, 956 (9th Cir. 2014).
Though the claim-of-right defense has been limited in
other contexts, see id., it continues to apply to allegations of
extortion involving threats of economic harm. So long as the
alleged extortioner seeks payment for services that have some
“objective value,” Viacom, 747 F. Supp. at 212, n.7, he has “a
lawful claim to the property obtained.” Brokerage Concepts,
140 F.3d at 524. Consequently, barring any “preexisting right
to be free of the economic fear . . . utilized” on the part of the
threatened party, United States v. Tobin, 155 F.3d 636, 640
(3d Cir. 1998), “purely economic threats” do not violate the
LEVITT V. YELP! INC. 15
Hobbs Act, id.; see also George Lussier Enters., Inc. v.
Subaru of New England, Inc., 393 F.3d 36, 50 (1st Cir. 2004).
In Brokerage Concepts, for example, the Third Circuit
considered whether payments received by a health
maintenance organization (“HMO”) were the product of
extortion by wrongful use of economic fear. 140 F.3d at 501.
In that case, the HMO refused to approve a pharmacy
branch’s application to join the HMO’s network of medical
prescription providers unless the branch discontinued its
contractual relationship with a particular health care
consulting firm and gave its business to one of the HMO’s
subsidiaries. Id. The HMO also applied various “hard-ball”
negotiation tactics, such as auditing and putting a “freeze” on
the pharmacy’s other locations, which had previously been
approved to join the HMO’s network. Id. at 501, 506.
Eventually, the pharmacy branch acquiesced, dropped its
existing healthcare consulting firm, and made payments to the
HMO’s subsidiary.
Recognizing the undoubted value of access to the HMO’s
network, Brokerage Concepts concluded that the payments to
the HMO’s subsidiary were not the product of extortion. Id.
at 525–26. No law prohibited the HMO from conditioning
access to its network on such payments, and the pharmacy
had no “right” to access the network. Id. at 526. Brokerage
Concepts therefore declined to interpret a “mutually
beneficial exchange of property” between “two private
parties” as “the wrongful use of economic fear.” Id.
Similarly, in Sturm, the First Circuit held that “the term
‘wrongful’ requires the government to prove, in cases
involving extortion based on economic fear, that the
defendant knew that he was not legally entitled to the
16 LEVITT V. YELP! INC.
property that he [tried to obtain].” 870 F.2d at 774. Insisting
that “hard bargaining” does not amount to extortion, the
Seventh Circuit has likewise concluded that “[w]here the
defendant has a claim of right to property and exerts
economic pressure to obtain that property, that conduct is not
extortion and no violation of the Hobbs Act has occurred.”
Rennell v. Rowe, 635 F.3d 1008, 1011, 1012 (7th Cir. 2011);
see also United States v. Capo, 791 F.2d 1054, 1062–63 (2d
Cir. 1986) (noting “that fear of economic loss plays a role in
many business transactions that are entirely legitimate” and
therefore the Hobbs Act reaches only “the exploitation of the
fear of economic loss in order to obtain property to which the
exploiter is not entitled”), vacated in part on other grounds,
817 F.2d 947 (2d Cir. 1987) (en banc).
As to what one may threaten to do in the economic
context, Rothman v. Vedder Park Management, is instructive.
912 F.2d 315 (9th Cir. 1990). In that case, a group of tenants
sued the owner and operator of a mobile-home park, claiming
the owner violated the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. §§ 1961–68, by using
extortionate tactics to induce them to sign leases. Id. at 316.
We considered, under both the Hobbs Act and California law,
whether alleged threats that non-signers would have to pay
their own utility bills and would be subject to future rent
increases of undisclosed amounts were wrongful. Id. at
317–18.
We concluded that these threats were not wrongful and
therefore not extortionate. Id. at 318. Because the tenants did
not allege that the park owner “may not raise the rent of those
who have not signed the lease or that it may not refuse to pay
their utility bills,” the tenants had no pre-existing right to be
free of such threats. Id. Moreover, although the park owner
LEVITT V. YELP! INC. 17
threatened to raise the rent, he had a right to condition use of
his mobile-home park on payment. Id. The threats alleged
did not, therefore, amount to extortion. Id. In so holding, we
relied on the “general rule” that “what you may do in a
certain event you may threaten to do, that is, give warning of
your intention to do in that event, and thus allow the other
person the chance of avoiding the consequences.” Id.
(quoting McKay v. Retail Auto. Salesmen’s Local Union No.
1067, 16 Cal. 2d 311, 321 (1940)).
Sosa v. DIRECTV, Inc., is similarly instructive. 437 F.3d
923, 939–40 (9th Cir. 2006). In that case, we considered
whether claim-settlement letters sent by DIRECTV
constituted “extortion” within the meaning of the Hobbs Act
and California law. Id. at 939. We declined to adopt a broad
construction of the Hobbs Act, noting that while “[i]t is
certainly possible, perhaps even likely, that the threat of being
faced with a costly lawsuit induced ‘fear’ in [the plaintiffs],
. . . extortion requires more than fear.” Id. (citing Rothman,
912 F.2d at 318). We emphasized that “[t]he use of the fear
must be ‘wrongful.’” Id. (citing Rothman, 912 F.2d at 318).
And, although “the assertion of weak claims predicated on
unsupportable factual allegations may be said in some sense
to be wrongful,” we rejected a reading of either the Hobbs
Act or California’s extortion statute that would impose
liability for “threats of litigation where the asserted claims do
not rise to the level of a sham.” Id. at 939–40.2
Like the Hobbs Act, California law states that “[e]xtortion
is the obtaining of property from another, with his consent . . .
2
Our holding in Sosa was also influenced by the need to avoid an
interpretation of extortion that would impinge on the defendant’s First
Amendment rights. Id. at 940.
18 LEVITT V. YELP! INC.
induced by a wrongful use of force or fear.” Cal. Penal Code
§ 518 (emphasis added). California law also provides that
“[f]ear, such as will constitute extortion, may be induced by
a threat . . . [t]o do an unlawful injury to the person or
property of the individual threatened,” id. § 519(1) (emphasis
added), “thus excluding fear induced by threat to do a lawful
injury,” People v. Beggs, 178 Cal. 79, 83 (1918); see also In
re Nichols, 82 Cal. App. 73, 77 (Dist. Ct. App. 1927).
Accordingly, the elements of extortion under federal and
California law are substantially the same. See Sosa, 437 F.3d
at 939–40; Rothman, 912 F.2d at 317–18. The plaintiffs here
point to no pertinent distinctions between the federal and
California statutes.3
In sum, to state a claim of economic extortion under both
federal and California law, a litigant must demonstrate either
that he had a pre-existing right to be free from the threatened
harm, or that the defendant had no right to seek payment for
the service offered. Any less stringent standard would
transform a wide variety of legally acceptable business
dealings into extortion.
2
Given these stringent requirements, the business owners
in this case failed sufficiently to allege that Yelp wrongfully
threatened economic loss by manipulating user reviews.
3
Although we have noted that California does not have a claim-of-right
defense, see Gomez v. Garcia, 81 F.3d 95, 97 (9th Cir. 1996), the state
authority we relied on for that conclusion did not involve threats of
economic harm, see, e.g., Beggs, 178 Cal. at 83 (threats to accuse a person
of a crime); People v. Serrano, 11 Cal. App. 4th 1672, 1678 (Ct. App.
1992) (recovering debt by kidnapping and holding a person for ransom).
LEVITT V. YELP! INC. 19
To start, we note that there is no allegation that Yelp
directly threatened economic harm if the business owners
refused to purchase advertising packages from Yelp. While
the lack of such express threats does not alone dispose of the
extortion claims, see United States v. Marsh, 26 F.3d 1496,
1501 (9th Cir. 1994), it does make the business owners’ case
considerably more difficult. Absent explicit threats of
economic harm, the business owners must allege sufficient
facts to support the inference, In re Century Aluminum Co.
Sec. Litig., 729 F.3d 1104, 1107 (9th Cir. 2013), that Yelp
“inten[ded] . . . to induce payment through the use of threats
or the exploitation of [economic] fears,” United States v.
Greger, 716 F.2d 1275, 1278 (9th Cir. 1983).
We begin with Chan, who alleges that Yelp extorted her
by removing positive reviews from her Yelp page. Chan
asserts that she was deprived of the benefit of the positive
reviews Yelp users posted to Yelp’s website, and that, had
she received the benefits of the positive reviews, they would
have counteracted the negative reviews other users posted.
But Chan had no pre-existing right to have positive
reviews appear on Yelp’s website. She alleges no contractual
right pursuant to which Yelp must publish positive reviews,4
nor does any law require Yelp to publish them. By
withholding the benefit of these positive reviews, Yelp is
withholding a benefit that Yelp makes possible and
maintains. It has no obligation to do so, however. Chan
does not, and could not successfully, maintain that removal
4
Chan alleges that she purchased advertising after a Yelp representative
told her that Yelp could “tweak” her reviews if she advertised with Yelp.
But Chan does not allege that this pledge was part of her advertising
contract with Yelp.
20 LEVITT V. YELP! INC.
of positive user-generated reviews, by itself, violates anything
other than Yelp’s own purported practice. “[W]hat [Yelp]
may do in a certain event [Yelp] may threaten to do.”
Rothman, 912 F.2d at 318. Moreover, Chan does not allege
that the advertising Yelp sold her was a valueless sham, or
that she was already entitled to the advertising privileges
Yelp induced her to buy. See Viacom, 747 F. Supp. at 212
n.7. We thus “deal with a very narrow subset of the potential
universe of extortion cases: one involving solely the
accusation of the wrongful use of economic fear where two
private parties have engaged in a mutually beneficial
exchange of property.” Brokerage Concepts, 140 F.3d at
525–26.
As Chan alleges no independent barrier to the ratings-
manipulation of which she complains, and as there is no
allegation that Yelp’s advertising services are, objectively,
worthless, see Viacom, 747 F. Supp. at 212 n.7, any implicit
threat by Yelp to remove positive reviews absent payment for
advertising was not wrongful within the meaning of the
extortion statutes.
This conclusion is not entirely the end of the matter, as
Chan alleges that the ratings manipulation negatively affected
her “business’s reputation.” But Chan does not connect her
claim of reputational harm to a specific allegation of
wrongful conduct.5 We note, too, that unlike the other
5
By the reference to reputational injuries, the business owners may have
meant to invoke trade libel law as the basis for the wrongfulness element
of extortion. But as the business owners have not pled the other elements
of trade libel, see Gregory v. McDonnel Douglas Corp., 17 Cal. 3d 596,
600 (1976); City of Costa Mesa v. D’Alessio Invs., LLC, 214 Cal. App. 4th
358, 375–76 (Ct. App. 2013), we do not decide whether a sufficient
LEVITT V. YELP! INC. 21
business owners, Chan at one time had a contractual
relationship with Yelp. It may be that by manipulating
Chan’s ratings to induce her to increase her advertising
dollars, Yelp “breached [its] duties under the contract[ ].”
Rennell, 635 F.3d at 1014. “But those claims should be
pursued through state-law theories of contract . . . — not
[extortion].” Id.
Chan’s pleadings thus fail to allege that deflation of her
business’s overall rating resulting from removing positive
reviews constitutes “wrongful” conduct, and she therefore
fails to state a claim of economic extortion.
Levitt and Mercurio similarly allege that Yelp attempted
to extort them by removing positive user reviews. As with
Chan, such allegations are insufficient to show that Yelp
threatened them wrongfully.
The other brand of extortionate ratings manipulation the
business owners allege is the re-posting of negative reviews
and the placement of negative reviews at the top of the
business owners’ Yelp pages. Business owners Mercurio and
Cats and Dogs bring these allegations. Here, too, however,
Cats and Dogs and Mercurio have no claim that it is
independently wrongful for Yelp to post and arrange actual
user reviews on its website as it sees fit. The business owners
may deem the posting or order of user reviews as a threat of
economic harm, but it is not unlawful for Yelp to post and
sequence the reviews. As Yelp has the right to charge for
legitimate advertising services, the threat of economic harm
that Yelp leveraged is, at most, hard bargaining.
allegation of trade libel could supply the wrongfulness element for
extortion purposes.
22 LEVITT V. YELP! INC.
C. Yelp’s Alleged Authoring of Negative Reviews
We next consider whether the business owners have
adequately pled a claim of extortion based on Yelp’s alleged
authoring of negative reviews.
To survive a motion to dismiss for failure to state a claim
after the Supreme Court’s decisions in Ashcroft v. Iqbal,
556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007), the business owners’ factual allegations
“must . . . suggest that the claim has at least a plausible
chance of success.” In re Century Aluminum, 729 F.3d at
1107. In other words, their complaint “must allege ‘factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.’” Id.
(quoting Iqbal, 556 U.S. at 678).
Following Iqbal and Twombly, we have attempted to
reconcile the plausibility standard as set out in those rulings
with the more lenient pleading standard the Court has also, at
times, applied. See Eclectic Props. E., LLC v. Marcus &
Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014) (citing
Swierkiewicz v. Sorema, N.A., 534 U.S. 506 (2002) and
Erickson v. Pardus, 551 U.S. 89 (2007) (per curiam)). While
recognizing some tension among the Court’s pleading-
standards cases, we have settled on a two-step process for
evaluating pleadings:
First, to be entitled to the presumption of
truth, allegations in a complaint or
counterclaim may not simply recite the
elements of a cause of action, but must
contain sufficient allegations of underlying
facts to give fair notice and to enable the
LEVITT V. YELP! INC. 23
opposing party to defend itself effectively.
Second, the factual allegations that are taken
as true must plausibly suggest an entitlement
to relief, such that it is not unfair to require
the opposing party to be subjected to the
expense of discovery and continued litigation.
Id. (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.
2011)). In all cases, evaluating a complaint’s plausibility is
a “context-specific” endeavor that requires courts to “draw on
. . . judicial experience and common sense.” Id. at 995–96
(internal quotation marks omitted).
Applying this standard, we conclude that the business
owners have not alleged sufficient facts to support their claim
that Yelp authored negative user reviews of the businesses in
question.
Only two business owners allege that Yelp authored
negative reviews of their businesses: Cats and Dogs and
Mercurio. Cats and Dogs’ allegations concern negative
reviews from just two users, Chris R. and Kay K. Cats and
Dogs admits that the Chris R. review corresponds with an
actual client visit, as it complained to Yelp that the review
was posted more than a year after the visit. In light of this
acknowledgment, common sense suggests that Yelp was not
the author of the Chris R. review. So the allegation that Yelp
itself authored negative reviews must boil down to the two
reviews attributed to Kay K.
The facts alleged in the complaint do not plausibly
establish that Yelp authored the Kay K. review. Yelp is a
forum for consumers to review businesses, and huge numbers
of consumers do just that. For Cats and Dogs to make a
24 LEVITT V. YELP! INC.
plausible claim that Yelp authored the Kay K. reviews, it
must plead facts tending to demonstrate that the Kay K.
review was not, as is usual, authored by a user. Cats and
Dogs pleads no such facts. In the Second Amended
Complaint, Cats and Dogs suggested that the Kay K. reviews
were authored not by Yelp, but by the same person who
authored the Chris R. posts or by a person who had
vandalized the hospital. And while the Third Amended
Complaint alleges generally that “approximately 200 Yelp
employees or individuals acting on behalf of Yelp have
written reviews of business on Yelp,” and that Yelp’s CEO
admitted in a New York Times blog post that Yelp has paid
users to write reviews, nothing connects these general
allegations to the specific, negative reviews complained of
here.
Mercurio fares no better. He surmises that because he has
no records of doing the work cited in the review, and because
the names of the users do not match the names of his
customers, Yelp authored the negative reviews. But even if
a particular review was not accurate as to the work done or
the customer’s name, the inaccuracy does not make it
plausible that it was Yelp — as opposed to a competitor, or
a disgruntled customer hiding behind an alias, or an angry
neighbor, just to give a few possibilities — that authored the
offending review.
Accordingly, we agree with the district court that the
Third Amended Complaint does not allege sufficient facts
from which to infer that Yelp authored the negative reviews
of which Cats and Dogs and Mercurio complain.
For these reasons and the reasons explained in Part II.B
of this opinion, we conclude that none of the business owners
LEVITT V. YELP! INC. 25
have stated a claim of “unlawful” conduct on the basis of
extortion. We therefore affirm the dismissal of the separate
claims of civil extortion and attempted civil extortion, as
well.6
D. The UCL “Unfair” Prong
“Each prong of the UCL is a separate and distinct theory
of liability,” and so “the ‘unfair’ practices prong offers
[plaintiffs] an independent basis for relief.” Lozano v. AT &
T Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007). At
least with respect to business-competitor cases, to state a
claim under the UCL’s “unfair” prong the alleged unfairness
must “be tethered to some legislatively declared policy or
proof of some actual or threatened impact on competition.”
Cel-Tech, 20 Cal. 4th at 186–87.
The business owners acknowledge that the Cel-Tech
standard applies here. Although this case is not a suit
involving “unfairness to the defendant’s competitors,”
Lozano, 504 F.3d at 735 (emphasis added), as Yelp does not
compete with the business owners, the crux of the business
owners’ complaint is that Yelp’s conduct unfairly injures
their economic interests to the benefit of other businesses
who choose to advertise with Yelp.
In business-competitor claims, “the word ‘unfair’ . . .
means conduct that threatens an incipient violation of an
antitrust law, or violates the policy or spirit of one of those
laws because its effects are comparable to or the same as a
violation of the law, or otherwise significantly threatens or
6
We do so without reaching the question of whether California courts
recognize a distinct tort of civil extortion.
26 LEVITT V. YELP! INC.
harms competition.” Cel-Tech, 20 Cal. 4th at 187. Under
this standard, the business owners have not stated a claim that
Yelp violated the UCL’s prohibition of unfair business
practices.
The business owners do not allege that Yelp violated any
“legislatively declared policy” other than the prohibitions on
extortion discussed above. For the reasons discussed, they
have not pled facts sufficient to support an inference of
extortion.
As to violations of antitrust principles, the business
owners allege generally that Yelp’s conduct “harms
competition by favoring businesses that submit to Yelp’s
manipulative conduct and purchase advertising to the
detriment of competing businesses that decline to purchase
advertising.” This very general allegation does not satisfy
Cel-Tech’s requirement that the effect of Yelp’s conduct
amounts to a violation of antitrust laws “or otherwise
significantly threatens or harms competition.” Id.
For these reasons, we conclude that the UCL claim fails
under the “unfair” prong, as well.7
7
The business owners suggest that the district court should have allowed
them to participate in discovery before granting the motion to dismiss, so
that the business owners could have marshaled facts to support their
allegations. Because the business owners sought discovery relating to
Yelp’s challenge to their standing, which Yelp does not renew on appeal,
and because we affirm the dismissal based on the Third Amended
Complaint’s failure to state a claim, the discovery sought could not have
affected our decision.
LEVITT V. YELP! INC. 27
III.
The business owners’ Third Amended Complaint fails to
state a claim under California’s unfair competition laws, and
fails to sufficiently allege extortion or attempted extortion.
We emphasize that we are not holding that no cause of
action exists that would cover conduct such as that alleged, if
adequately pled.8 But for all the reasons noted, extortion is an
exceedingly narrow concept as applied to fundamentally
economic behavior. The business owners have not alleged a
legal theory or plausible facts to support the theories they do
argue.
The judgment of the district court is, accordingly,
AFFIRMED.
8
Again, we are not considering whether the CDA would pose a barrier
to any such claims.