Case Number: BC484055 Hearing Date: March 07, 2019 Dept: 50

Superior Court of California

County of Los Angeles

Department 50

james demetriades,

Plaintiff,

vs.

YELP, INC., et al.,

Defendants.

Case No.:

BC 484055

Hearing Date:

March 7, 2019

Hearing Time:

8:30 a.m.

[TENTATIVE] ORDER RE:

YELP INC.’S MOTION FOR JUDGMENT

James Demetriades (“Demetriades”) filed this action on May 3, 2012 against Defendant Yelp, Inc. (“Yelp”) seeking injunctive relief pursuant to Business and Professions Code sections 17200 and 17500 et seq. Multiversal Enterprises-Mammoth Properties, LLC (“Multiversal”) substituted in as plaintiff on February 25, 2015. Trial commenced on January 22, 2019. After Plaintiff completed its case in chief, Multiversal moved for judgment pursuant to CCP section 631.8.

Background

In this case, Multiversal asserts a cause of action for unfair, unlawful, or fraudulent business act or practices (the Unfair Competition Law (“UCL”); Business & Professions Code section 17200 et seq.) and for false advertising (Business & Professions Code section 17500 et seq.). Multiversal identifies five statements (the “Challenged Statements”) as the basis of its false advertising and unlawful competition claims. The Challenged Statements are the following:

“Yelp uses the filter to give consumers the most trusted reviews.”

“All reviews that live on people’s profile pages go through a remarkable filtering process that takes the reviews that are the most trustworthy and from the most established sources and displays them on the business page. This keeps less trustworthy reviews out so that when it comes time to make a decision you can make that using information and insights that are actually helpful.”

“Rest assured that our engineers are working to make sure that whatever is up there is the most unbiased and accurate information you will be able to find about local businesses.”

“Yelp is always working to do as good a job as possible on a very complicated task—only showing the most trustworthy and useful content out there.”

“Yelp has an automated filter that suppresses a small portion of reviews—it targets those suspicious ones you see on other sites.” (Stipulation of Facts Nos. 9 and 10 [emphasis in original].)

The first four statements were made in a video released by Yelp in 2010. The fifth statement was made in Yelp’s “About Us” webpage.

Multiversal claims that the Challenged Statements are misleading and untrue. Specifically, Multiversal alleges that Yelp does not use a filter to give consumers the most trusted reviews; Yelp does not take “the reviews that are the most trustworthy and from the most established sources and displays them on the business page”; Yelp is not always working to give consumers the most “trustworthy” and “unbiased” reviews; and that Yelp’s automated filter does not only suppress a small portion of reviews. (See FAC, ¶ 10.) Instead, Yelp allows posts of the most entertaining reviews to be shown on the unfiltered portion of the website, regardless of the source, allows post of reviews to be shown on the unfiltered portion of a local business page on the website, regardless of whether the source is trustworthy or unbiased, and suppresses a substantial portion of reviews that are unbiased or untrustworthy, and filters them. (See FAC, ¶ 10.) Multiversal alleges that Yelp pages contain reviews that are neither unbiased nor trustworthy because Yelp pages contain reviews from users who are specifically and demonstrably biased against the businesses which they review. (See FAC, ¶ 11.)

Multiversal put on evidence that it has spent money to purchase advertising from Yelp and advertised on the website, and contends that it did so in reliance on the fact that the Challenged Statements were true.

For purposes of this motion only, Yelp is not addressing the issue of whether the evidence put forth thus far by Multiversal establishes that the Challenged Statements are misleading and untrue. Yelp’s motion is based upon two claims only: (1) Multiversal lacks standing to assert its claims against Yelp because Multiversal did not rely on the purportedly false or misleading statements in purchasing advertising. (2) Yelp has not made the statements that Multiversal attempts to enjoin for more than five years, and Multiversal has failed to show that any challenged conduct is likely to reoccur.

Discussion

Multiversal Did Not Rely On The Purportedly False Or Misleading Statements.

Unfair Competition and False Advertising

“The UCL prohibits ‘any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising,” and any act prohibited by the false advertising law.’” Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 226, quoting Bus. & Prof. Code, § 172000.) The FAL “prohibits advertising that contains ‘any statement . . . which is untrue or misleading, and which is known, or . . . should be known, to be untrue or misleading . . . .’ Bus. & Prof. Code, § 175000.)” (Ibid.)

A failure to prove reasonable reliance on the allegedly false or misleading advertising is fatal to UCL and FAL claims because California law imposes an “actual reliance” requirement on plaintiffs prosecuting UCL and FAL claims. (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 326, citing In re Tobacco II Cases (2009) 46 Cal.4th 298, 326.) In other words, plaintiffs prosecuting UCL and FAL claims must show that in the absence of the defendant’s misrepresentation, “the plaintiff ‘in all reasonable probability’ would not have engaged in the injury-producing conduct.” (In re Tobacco II Cases, supra, 46 Cal.4th at p. 326.)

The Evidence Regarding Reliance

In its motion, Yelp principally discusses the evidence regarding reliance in connection with Multiversal’s purchase of the “cost-per-click advertising in January, 2012. However, Multiversal presented evidence in its case in chief that in June of 2011, it purchased what Yelp describes as a “marketing package, which consisted solely of the ability to add a photo slideshow on to the Rafter’s business page.” (Motion, 8:18-20.) Not surprisingly, Multiversal describes the purchase as “advertising” and Demetriades testified that what he was purchasing “was like an infomercial” because it included “pictures and descriptions about a restaurant.” He further testified that “like all advertising, it is part of marketing.” (2/1/2019 Transcript 57: 21-26.) Because Yelp has not presented any evidence in its case in chief, the testimony of Demetriades remains unrebutted as far as what constitutes advertising.

In its motion, Yelp was not able to identify any evidence to show that when Demetriades, on behalf of Multiversal, purchased the photo slideshow package, he was not relying upon the Challenged Statements. In the reply, Yelp only points to evidence that two employees of Multiversal had expressed their own dissatisfaction with Yelp’s review filter. This is insufficient to show lack of reliance. Because Multiversal, through the testimony of Demetriades, presented evidence of reliance upon the Challenged Statements when the photo slideshow package was purchased and that the package constituted a form of advertising, the motion is denied as to the reliance issue.

Multiversal Has Failed To Show That Any Challenged Conduct Is Likely To Reoccur.

Yelp contends in its motion that judgment should be granted because Multiversal has failed to show that any challenged conduct is likely to reoccur. More specifically, Yelp points out that the undisputed evidence (Stipulated Facts Nos. 12 and 13) shows that it stopped showing the 2010 Video on its website on November 13, 2013 and it changed its “About Us” page on its website on the same date. Thus, Yelp contends injunctive relief is unnecessary because the purported unlawful conduct has ceased and Multiversal has not presented any evidence that Yelp is likely to reinstate the 2010 Video or the prior “About Us” page. In support of this position, Yelp cites, inter alia, to the 1995 California Court of Appeal case of Cisneros v U.D. Registry, Inc., 39 Cal. App. 4th 548, 574 (Cisneros). In Cisneros, a case brought by low income renters for violations of law by consumer credit reporting and investigative agencies, the trial court refused to grant injunctive relief, in part, because the offending conduct by the agencies had stopped since they received an order from the court. In upholding the trial court, the Court of Appeal stated that

[t]he denial of an injunction is within the sound discretion of the trial court and will be upheld on appeal absent an abuse of discretion. [Citation.] A change in circumstances, rendering injunctive relief moot or unnecessary, justifies the denial of an injunction. [Citation.] The injunctive remedy should not be exercised ‘in the absence of any evidence that the acts are likely to be repeated in the future. [Citation.] Injunctive relief can be denied where the defendant voluntarily discontinues the wrongful conduct.

Yelp also argues (but without the benefit of any expert testimony of its own) that the testimony of Dr. Stewart regarding (a) his 2013 Video pretests, and (b) his modified 2013 Video pretests that excluded references to Yelp’s filter, does not demonstrate that there is content in the 2013 Video of a similar nature to that found in the 2010 Video because the people viewing both 2013 Video pretests identified the same “takeaway beliefs.” Consequently, Yelp contends, there is no evidence that the 2013 Video is the source of the “takeaway beliefs” held by the viewers, and therefore, there is no evidence of continuing conduct under the case of People v Twoomey (1984) 157 Cal. App. 3d 1, 20.

In response, Multiversal relies upon, inter alia, the 1999 California Supreme Court case of Aguilar v Avis Rent a Car System, Inc. 21 Cal. 4th 12, 133 (Aguilar). In Aguilar, an employment discrimination case was brought by an employee seeking among other remedies an injunction prohibiting a certain employee from using racial epithets in the future. In that case, the defendants claimed that injunctive relief was unnecessary because the offending employee had stopped the unlawful conduct during the pendency of the case. The trial court rejected that contention and found that there was a substantial likelihood that the employee would resume the offending contact in the future unless restrained. In upholding the trial court, the California Supreme Court found that “[t]he mere fact that a defendant refrains from unlawful conduct during the pendency of a lawsuit does not necessarily preclude the trial court from issuing injunctive relief to prevent a posttrial continuation of the unlawful conduct.” The Supreme Court went on to note that “[M]any courts have rejected arguments against injunctive relief where defendants changed their practices only in response to being sued.” (Ibid.) The Supreme Court also emphasized that ‘[g]enerally a person subjected to employment discrimination is entitled to an injunction against future discrimination . . . unless the employer proves it is unlikely to repeat the practice. . . . An employer that takes curative actions only after it has been sued fails to provide sufficient assurances that it will not repeat the violation to justify denying an injunction.” (Emphasis added.)

In this case, Multiversal points to the fact that Yelp did not remove the 2010 Video and the “About Us” page until after this litigation was filed and the case was pending before the Court of Appeal; therefore, under Aguilar, Multiversal contends that Yelp has the burden to prove it is unlikely to repeat use of the Challenged Statements. Multiversal also contends that, under Twoomey, it has presented evidence that past violations will likely occur because Yelp has posted the 2013 Video that Dr. Stewart opines causes viewers to take away the same beliefs as they did with the 2010 Video. Multiversal points to Dr. Stewart’s testimony that the pretest responses, though smaller than the full survey conducted on the 2010 Video, were statistically sufficient to draw the conclusions he drew about the similar “takeaway beliefs.”

The Court recognizes that there is a tension between the principles enunciated in the Cisneros case and the Aguilar case. On the one hand, Aguilar is controlling because it is a Supreme Court opinion, whereas Cisneros is an opinion from the Court of Appeal. On the other hand, Aguilar involved an employment case where there was evidence that the employee might resume that past unlawful behavior, whereas Cisneros was not an employment case and arguably somewhat more akin to the type of case before this Court. However, at this juncture, the Court finds that under Aguilar, where there is evidence that Yelp stopped using the 2010 Video and the “About Us” page after the inception of this lawsuit, the burden shifts to Yelp to demonstrate that the lawsuit was not the reason for the change and that it will not be using the 2010 Video and “About Us” page in the future. Because Yelp has not presented its case in chief, there is no such evidence before the Court.

Even if the burden does not shift under the facts of this nonemployment case, without the benefit of Yelp’s evidence regarding, inter alia, the 2013 Video pretests, the Court does not find that it is in a position at this time to determine whether the 2013 Video demonstrates sufficiently similar conduct under Twoomey or whether the results of the pretest done on the 2013 Video without the reference to Yelp’s filter show that the “takeaway beliefs” of the viewers of the 2013 Video were not the result of similar representations but the result of some other phenomenon. For these reasons, the Court does not find that Yelp has prevailed on the second prong of its motion for judgment.

Conclusion

Based on the foregoing, Yelp’s motion for judgment is denied in its entirety.

Multiversal is ordered to give notice of this ruling.

DATED: March 7, 2019 ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court