Courts Are Rejecting Attempts to Weaponize Laws That Protect Consumer Reviews
In 2014, California enacted AB2365, sometimes called the “Yelp law,” codified at Cal. Civil Code 1670.8. The law prohibits businesses from suppressing consumer reviews (on Yelp or elsewhere). Its main substantive terms:
(1) A contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.
(2) It shall be unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.
Until recently, 1670.8 had been mostly invisible in court opinions. Hypothetically, that obscurity indicates that businesses have gotten the message about not restricting consumer reviews, so statutory enforcement has not been required. Sadly, that’s not necessarily true. We keep getting anecdotal reports of businesses trying to gag their consumers’ reviews post-CRFA and 1670.8. Thus, more likely, this law is one of thousands of laws that the California legislature passes with some hype but then gets widely ignored.
After a decade of relative dormancy, 1670.8 recently started showing up more in court opinions–but not necessarily in a good way. In the last year, a team of California litigators (from Singleton Schreiber in Sacramento and Law Offices of Thomas Leary from San Diego) has launched a 1670.8 enforcement campaign. I don’t know how many lawsuits they’ve filed because the team is filing many (all?) of their cases in state court. I can only see the cases filed in or removed to federal court, and only then when the cases trigger one of my alerts.
I would celebrate more 1670.8 enforcement if it helps stop bad business practices. Unfortunately, I’m not sure that’s the situation here. Of the complaints I’ve read, it appears the litigation team is tendentiously reading businesses’ TOSes to claim that standard (if maybe unnecessary or ill-considered) TOS clauses act as improper restrictions on consumer reviews, when the more natural reading of the TOS would not indicate any statutory violation at all.
Any consumer-facing law that provides a private right of action inherently poses the risk of weaponized enforcement for extractive purposes, and I worry that may be taking place here. The complaints remind me a bit of the vexatious side of ADA litigation, in that the litigation team may be relatively indiscriminate about potential defendants, may be suing businesses that the named plaintiffs never actually planned to transact with, and may be doing so based on dubious interpretations of the law. If this is correct, then these lawsuits aren’t designed to protect consumers at all, and they may turn an important consumer protection law into a net statutory loss.
Over the weekend, I searched for “1670.8” in Lexis and Westlaw and found the following decisions involving the litigation team:
- Callaway v. Anheuser-Busch Companies, LLC, 2024 WL 1122415 (C.D. Cal. March 14, 2024) and 2024 WL 1260806 (C.D. Cal. March 18, 2024) (sending the case to arbitration)
- Roldan v. Bank of America, N.A., 2024 WL 1430251 (C.D. Cal. March 19, 2024) (dismissed for inadequate allegations about the consumer’s purchase of goods or services)
- Shofet v. Zillow Inc., 2024 WL 1343196 (C.D. Cal. March 27, 2024) (refusing remand to state court)
- Mora v. Block, Inc., 2024 WL 1311289 (C.D. Cal. March 27, 2024) (remanding to state court)
The two most recent cases are more of the same:
Anderson v. UPS of Am., Inc., 2024 U.S. Dist. LEXIS 89527 (C.D. Cal. May 17, 2024)
The court rejects the case on several grounds:
- the private right of act is available only to “consumers,” defined as individuals who “buy a good or service for personal, family, or household use, with no intention of resale.” The plaintiffs didn’t properly allege this.
- the complaint “does not identify what goods or services are ‘offered and promoted’ on the Website and, more importantly, which of these good or services are governed by the contract at issue.”
- “there are no facts asserted in the Complaint to support the contention that the Terms prevent consumers from posting comments on the third-party websites linked at ups.com. The Court also is not persuaded that the Terms, as written, plausibly could be interpreted to prohibit any statements made on a third-party website.”
Lardizabal v. Vanguard Group, Inc., 2024 WL 2867786 (E.D. Pa. June 6, 2024)
[In an earlier decision, the case was transferred from S.D. Cal. to E.D. Pa., the defendant’s home court. Lardizabal v. Vanguard Grp., Inc., 2024 U.S. Dist. LEXIS 68994 (S.D. Cal. April 15, 2024)]
Like the Roldan and Quigley cases, the court says “Plaintiffs fail to allege any facts that show that the Online Terms of Use constitute a ‘contract or proposed contract for the sale or lease of consumer goods or services.’…Here, the Online Terms of Use govern the use of the website itself as opposed to the ‘sale or lease of goods.'” I believe many other complaints from the litigation team are trying to cover TOS terms governing content uploaded to the defendant’s website, which is almost certainly outside the statutory language.
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While I’m likely to condemn the litigation campaign, it may still offer a helpful lesson for you. You might consider some of the TOS provisions catching the attention of the litigation team (such as non-disparagement clauses, coupled or independent of a trademark license) and consider rewriting or scrubbing those terms from your TOS. In general, when it comes to TOS drafting, it’s worth rereading the draft through the lens of a tendentious consumer lawyer. If in doubt, take it out (of the TOS).
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UPDATE: Masry v. Lowe’s Companies, Inc., 2024 WL 3228086 (N.D. Cal. June 28, 2024):
Plaintiffs fail to allege that the website terms of use governed their purchases on the website. Rather, they allege that the terms of use govern “regardless of whether users are simply visiting the Sites or are actual purchasers or registered members of the Sites.” Plaintiffs do not explain why a contract that applies regardless of whether a purchase or sale is contemplated is a contract “for the purchase or sale” of goods. To the contrary, Plaintiffs effectively concede that the website is a free service and therefore that their use of the website is not governed by Section 1670.8.
JULY 2024 UPDATE: Two of the above cases issued another ruling.
Shofet v. Zillow, Inc., 2024 WL 3517724 (C.D. Cal. July 22, 2024). Citing many of the cases above, the court says that the offer of free online services isn’t the sale or lease of consumer goods or services.
The court also questions the non-disparagement restrictions: ” it is obvious that the objected-to language in the TOU is aimed at preserving Defendants’ ability to moderate Zillow to keep it free or illegal or hateful comments. Read in this context, the objected-to terms in the TOU do not prohibit users from disparaging Defendants…the TOU contains no language whatsoever stating that Plaintiffs may not make disparaging remarks about Defendants.”
More interesting is whether there is a private right of action for including a restricted clause in the contract, even if it’s never enforced. The Anderson court said yes. This court says no (“§ 1670.8(a)(1) does not create a private right of action”).
Roldan v. Bank of America N.A., 2024 WL 3517707 (C.D. Cal. July 23, 2024): “under Section 1670.8, a plaintiff must allege that they actually purchased a good or service from the defendant….Nowhere in the FAC do Plaintiffs specifically allege that they purchased goods or services from the Defendants.”