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Another Day in Court for Yelp


Bloomberg
The Yelp Inc. logo is displayed in the window of a restaurant in New York on Thursday, March 1, 2012.

What happens when you combine a plain-spoken small claims court judge, an aggrieved law firm and local search site Yelp?

In San Diego this April, the result was a $2,700 judgment against the site, and a re-airing of allegations —  rejected by a U.S. District judge in late 2011 — that businesses are pressured to advertise with Yelp at the threat of lowered visibility on its site. Yelp fought — and won — a potential class action lawsuit over similar claims beginning in 2010.

According to a transcript of the hearing, their re-emergence in a San Diego court last month was followed by the judge describing Yelp’s advertising contract as “the modern-day version of the mafia going to stores and saying, “You wanna not be bothered?”

The case will be taken to a higher court on appeal.

The McMillan Law Group, which brought the claim against Yelp, agreed to an advertising deal with the site after it had become “a good source of new clients for us,” said attorney Julian McMillan, representing his firm in the court.  The deal involved the firm paying Yelp $540 per month in return for 1,200 ad impressions per month on the site. An impression is counted each time an ad is displayed to a user.

Mr. McMillan claimed Yelp did not deliver the 1,200 monthly impressions, leading to his firm cancelling the contract and asking for its money back. The site’s representative in the court, Bradley Bohensky, said the claim was based on a misunderstanding of how such impressions are measured, and that Yelp in fact “over delivered” on the ad impressions promised.

On top of the dispute over ad impressions, Mr. McMillan raised the allegation — not part of his claim against Yelp — that after cancelling the advertising contract with the company, the visibility of his business and its positive reviews declined on the site.

That claim has been raised against the company many times in the past, and was declared a “typical Yelp conspiracy theory” by the site’s CEO, Jeremy Stoppleman, in a 2010 response to such allegations. But Mr. McMillan told the Wall Street Journal on Tuesday that he plans on filing a separate complaint against the company over the allegation.

In the end, much of the judgment in the San Diego court rested on the judge’s decision that Yelp’s contract with the law firm — a standard agreement it makes with advertisers — was a “contract of adhesion”, a legal term for a contract that heavily favors one party over the other and whose terms are not freely negotiated between the two. The terms of the contract, Judge Doft said, were “unfair and one sided.”

“Every single bit of settled law is twisted around by this contract,” the judge said. “Everything is twisted around.”

Vince Sollitto, Yelp’s Vice President of Corporate Communications, told the WSJ on Tuesday the judgment of the small-claims court was “completely at odds and atypical with other rulings.” The plaintiff, he said, “misstated the facts repeatedly to the judge, who in turn appeared to ignore both the actual facts in front of him and the applicable law.” An appeal against the judgment will take place in “a more experienced court where lawyers from both sides can argue facts not opinion, and expect a ruling based on actual facts,” he added.

In the hearing, Judge Doft declined a request by Mr. McMillan for a written ruling, saying his court was too busy for the “luxury of writing out decisions.” And decisions like his, he said, won’t make “a bucket of spit’s difference in what happens” in the appeal of the case, because appeals against small claims court rulings do not consider the previous hearings and are considered new trials.

But Mr. McMillan relishes the prospect of a new trial, which may help drive business to his bankruptcy law firm. In a recent blog post addressing other small businesses that may have disputes with Yelp, he hailed his “massive victory” against the site. “We can help you get your hard earned money back,” he wrote, adding, for good measure, his phone number for those who may wish to call and discuss their complaints.

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Mystic Maggie

All of the Mystic Maggie Posts are RSS Reader Feeds from around the web. All copyright remains with the original publisher. No copyright is claimed or intended. Where supplied, links back to the original article are included.

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