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Yelp Sues Firm That Sued It for Coercion, Alleging Posting of Fake Favorable Reviews

Monday, September 9, 2013
By Joyce E. Cutler

SAN FRANCISCO --Yelp, Inc. sued a San Diego bankruptcy law boutique Aug. 20 alleging that the firm used the online consumer-review website to post fake glowing reviews and testimonials about itself in violation of California consumer protection laws (Yelp, Inc. v. McMillan Law Group Inc., Cal. Super. Ct., S.F., No. CGC13-533654, filed 8/20/13).

The complaint, filed in the California Superior Court for San Francisco County, alleges that McMillan Law Group sent Yelp positive reviews of the firm purportedly written by bankruptcy clients but actually originated by employees of the firm. Yelp alleges that this deceived consumers and violates the state's unfair business practices act, California Business and Professions Code Section 17200, as well as Section 17500, the state false advertising law.

Yelp vs. Firm

“Online reviews are a great resource for consumers to learn about local businesses and professionals. Unfortunately, however, some businesses try to game the system by stacking the deck in their favor with planted or fake reviews. The McMillan Law Group--run by Julian McMillan--is one such business,” the complaint asserts.

San Francisco-based Yelp prohibits deceptive and bogus reviews through its terms of service, and the company alleges that it has developed sophisticated technologies to detect and remove such content. Yelp said it aggressively investigates businesses that post or purchase fake reviews, and works diligently to warn consumers about them.

“The McMillan Law Group's efforts to mislead consumers are particularly brazen and disappointing given they have targeted some of the most vulnerable consumers of all--individuals who may be facing bankruptcy and who are looking for potential legal representation,” the complaint says.

'Bullying.'

Julian McMillan said Aug. 29 the message from Yelp's lawsuit is clear: ''Are they suing any other owners with pages on Yelp or just the one that sued them and won?”

''This goes straight to their MO. This is who they are,” McMillan told BNA, adding that ''every business they list is a potential defendant in litigation.”

''It appears when you mess with the bull you get the horns. The lawsuit from a PR standpoint is ridiculous,” he said, noting the lawsuit was filed two days before the San Diego Superior court appearance.

McMillan also questioned whether Yelp even has standing under sections 17200 and 17500.

''It's bullying tactics. I get it,” he said, ''They want me to spend some money but I just don't see how they come a winner in this. They're exposing themselves to discovery they have fought hard” in other cases challenging sales tactics and how reviews are filtered.

Yelp in October 2011 prevailed in a class-action lawsuit alleging that it creates and manipulates reviews to drive ad sales under the Communications Decency Act's immunity provision, at 47 U.S.C. §230(c)(1) (Levitt v. Yelp! Inc., N.D. Cal., No. 3:10-cv-01321 dismissed 10/26/11).

The U.S. Court of Appeals for the Ninth Circuit after July 11 oral arguments has taken under submission arguments in the appeal (Levitt v. Yelp! Inc., 9th Cir., No. 11-17676, oral arguments 7/11/13).

''This is another company that is run by children. This lawsuit does not make good business sense,” he said.

Firm vs. Yelp

The San Francisco lawsuit follows a Feb. 13 small claims filing in San Diego by McMillan Law Group against Yelp. The law firm alleged it was coerced into entering into an advertising contract with Yelp in order to receive favorable views. It asserted that the contract was void due to fraud in inducement to advertise and duress, and that the website failed to provide any of the promised services to display ads in order to attract new clients.

McMillan said he was approached last fall by a sales representative and encouraged to buy advertising. After four months of advertising, McMillan did not see the promised results and asked for a refund. Instead, he said, McMillan Law Group was charged a one-month cancellation fee.

A court commissioner April 26 awarded McMillan $2,700 plus $95 in costs. McMillan in a May 9 blog post called the ruling “a massive victory for every small business in the country currently advertising with Yelp, Inc.”

Yelp appealed, saying the dispute was subject to mandatory arbitration. After a hearing, Judge Jeffrey B. Barton of the California Superior Court for San Diego County ruled Aug. 26 that Yelp's arbitration agreement is not substantively unconscionable.

“Thus, the case is ordered to binding arbitration with the American Arbitration Association in San Francisco. Plaintiff shall contact the AAA to begin the process. Based on this decision, the trial is deferred to be decided by the arbitrator and the underlying small claims judgment is vacated and the matter is dismissed,” Barton said.

McMillan said arbitration in San Francisco over the $2,700 advertising refund he seeks will cost $4,000-$5,000.

Undermining Value

In its complaint against the McMillan firm Yelp said that if its users “believed that Yelp reviews were written by business owners and employees about their own businesses, or traded with other businesses for favorable reviews, the value of Yelp reviews, and of Yelp itself, would be undermined.”

Yelp alleges that the McMillan Law Group postings include five-star consumer reviews that actually were submitted by a lawyer who worked at the firm and his wife, an office manager, and purported clients for whom no bankruptcy filing was made.

The postings were made on a computer at the same internet protocol address as used by the attorney and office manager and which Julian McMillan used to log onto his personal Yelp account and into the firm's business account, the complaint asserts.

McMillan dismissed claims that lawyers are trading favorable reviews. ''So some attorneys I know put in reviews” indicating they as lawyers have sent clients to McMillan Law Group, and there is ''nothing untrue about that.”

Yelp further alleges McMillan has also “participated in a circle of San Diego lawyers who trade positive reviews.”

The McMillan Law Group's Yelp page currently has no reviews, although a filtered page notes that four reviews were removed for violating content guidelines or terms of service (TOS) and that 16 reviews were filtered and not factored into the firm's overall rating.

Yelp spokeswoman Kristen Whisenand said in an Aug. 27 e-mail to BNA that in addition “to being an egregious attempt to mislead consumers, this type of activity violates Yelp's TOS and can also violate FTC guidelines.”

The Federal Trade Commission in August 2010 charged public relations firm Reverb Communications Inc. with violating the FTC Act and engaging in deceptive practices by having its employees pose as consumers to post positive reviews of mobile gaming applications sold by the company's clients on the iTunes store.

Lawyers, Beware

Diane Karpman, a professional responsibility specialist with Karpman & Associates in Beverly Hills, Calif., said Aug. 27 she did not think there was a specific disciplinary rule governing fake posts, “but you can always 'fit something’ in somewhere. The [Section] 17200 law cases are exploding out here with lawyers,” she said.

“People sort of thought lawyers were immune [from the reach of this statute] until this year,” Karpman told BNA, when the California Court of Appeal, First District, upheld a preliminary injunction requiring immigration lawyer Christopher Stender and his law firm to provide notice to certain clients that another lawyer who had been employed by the firm had resigned from the bar with disciplinary charges pending and was not authorized to practice law.

The court rejected Stender's argument that use of the unfair business practices statute against lawyers would amount to an improper end-run around the judiciary's ultimate authority to regulate the practice of law.


The Yelp complaint is available at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/Yelp(2).pdf.

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