Ninth Circuit Upholds Yelp Win in Bogus Review Case
Investors had accused the online review site of propping up its earnings by coercing businesses into buying ads to get fake negative reviews removed.
November 21, 2017 at 04:05 PM
11 minute read
A federal appeals court on Tuesday upheld a ruling that tossed a securities class action lawsuit against Yelp Inc. claiming the online review site misled investors about the reliability of its reviews and how they're filtered.
Plaintiffs, represented by lead counsel at Robbins Geller Rudman & Dowd, had accused Yelp of propping up its earnings by coercing businesses into buying ads to get fake negative reviews removed from the site. They alleged that stock prices tanked after an April 2014 Wall Street Journal article cited 2,046 complaints to the Federal Trade Commission about the company's practices.
But in a 17-page opinion issued Tuesday, the U.S. Court of Appeals for the Ninth Circuit upheld a November 2015 decision from U.S. District Judge Jon Tigar of the Northern District of California dismissing the case.
In the lower court decision, Tigar concluded that Yelp never promised that every review on its site was authentic and reliable and that the company had explicitly disclosed that its screening algorithm had limitations. He also found that the plaintiffs hadn't sufficiently alleged a fraud on the market since they were basing their claims on the potential for fraud, rather than fraud itself.
In Tuesday's unanimous panel decision, Ninth Circuit Judge Ronald Gould upheld Tigar's decision in full and gave the plaintiffs no further opportunity to amend their claims.
“We hold that in the circumstances of this case disclosure of customer complaints that refer to allegations of fraud, without more, are insufficient to allege loss causation,” Gould wrote. ”Although plaintiffs' allegations are numerous, none states that an individual defendant had specific information regarding employee use of review manipulation when trying to sell advertising.”
Gould was joined in the decision by Ninth Circuit Judge Paul Watford and U.S. District Judge W. Louis Sands of the Middle District of Georgia, who was sitting by designation.
Yelp's lead lawyer, Gilbert Serota of Arnold & Porter Kaye Scholer, said that he was “pleased” with the decision, but directed a request for further comment to the company.
In an emailed statement, a Yelp spokesperson said the company has said all along that the theory of this case and others that alleged fraud by Yelp “was without merit.”
“Repeatedly courts have agreed with us, and we are glad to see the Ninth Circuit has affirmed the dismissal of this case,” the spokesperson said. “The simple fact is that Yelp does not manipulate reviews in favor of advertisers or against non-advertisers.”
Andrew Love of Robbins Geller, who argued the case on behalf of lead plaintiff Miami Fire Fighters' and Police Officers' Retirement Trust, didn't immediately respond to a voicemail message.
A federal appeals court on Tuesday upheld a ruling that tossed a securities class action lawsuit against Yelp Inc. claiming the online review site misled investors about the reliability of its reviews and how they're filtered.
Plaintiffs, represented by lead counsel at
But in a 17-page opinion issued Tuesday, the U.S. Court of Appeals for the Ninth Circuit upheld a November 2015 decision from U.S. District Judge Jon Tigar of the Northern District of California dismissing the case.
In the lower court decision, Tigar concluded that Yelp never promised that every review on its site was authentic and reliable and that the company had explicitly disclosed that its screening algorithm had limitations. He also found that the plaintiffs hadn't sufficiently alleged a fraud on the market since they were basing their claims on the potential for fraud, rather than fraud itself.
In Tuesday's unanimous panel decision, Ninth Circuit Judge Ronald Gould upheld Tigar's decision in full and gave the plaintiffs no further opportunity to amend their claims.
“We hold that in the circumstances of this case disclosure of customer complaints that refer to allegations of fraud, without more, are insufficient to allege loss causation,” Gould wrote. ”Although plaintiffs' allegations are numerous, none states that an individual defendant had specific information regarding employee use of review manipulation when trying to sell advertising.”
Gould was joined in the decision by Ninth Circuit Judge Paul Watford and U.S. District Judge
Yelp's lead lawyer, Gilbert Serota of
In an emailed statement, a Yelp spokesperson said the company has said all along that the theory of this case and others that alleged fraud by Yelp “was without merit.”
“Repeatedly courts have agreed with us, and we are glad to see the Ninth Circuit has affirmed the dismissal of this case,” the spokesperson said. “The simple fact is that Yelp does not manipulate reviews in favor of advertisers or against non-advertisers.”
Andrew Love of
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