Late last week, the California Court of Appeals affirmed the trial court’s judgment, after a bench trial, in favor of Yelp and against Multiversal Enterprises – Mammoth Properties, LLC (Multiversal), a restaurant operator in Mammoth Lakes, California. The plaintiff claimed that Yelp improperly promoted the ability of its proprietary software to screen out unreliable or biased reviews to the detriment of at least one of Multiversal’s restaurants, Rafters.
According to the Appellate Court, Multiversal purchased a “marketing package” on Yelp’s website. Some of its restaurants received “several” critical reviews and Yelp’s software “removed several positive reviews.” The opinion does not specify the time frame for these events but describes communications from August 2011 through April 2012 in which Multiversal or its principal, James Demetriades, claimed that Yelp’s software improperly filtered out reviews of their restaurant and demanded access to the “source code and algorithm for the so- called filters.” They also demanded that Yelp “override” the software and display reviews Demetriades deemed “real and legitimate.” The Appellate Court notes succinctly that “Yelp rejected all these demands.”
The Appellate Court further recounts that Demetriades filed suit in May 2012. (Multiversal was later substituted as the plaintiff). He sought injunctive relief for unfair competition and false advertising under relevant provisions of the California Business and Professional Code arising from Yelp’s public descriptions of its screening software; the Appellate Court does not mention a demand for monetary relief.
The Appellate Court details a number of alleged misstatements regarding the software, which it categorizes as falling into two categories: “(1) Yelp’s filter results in ‘trusted,’ ‘trustworthy,’ ‘unbiased,’ ‘accurate,’ and ‘useful’ reviews from ‘established sources’ (the ‘trustworthy’ claim) and (2) the filter suppresses only a small portion of “suspicious” reviews (the ’scope’ claim).” After a trial on the merits, Yelp prevailed.
Multiversal raised two issues on appeal that it claimed justified reversal of the judgment: the denial of the plaintiff’s motion to compel production of the source code; and the exclusion of Demetriades from a portion of the trial. The Appellate Court rejected both arguments and affirmed the judgment in favor of Yelp
As to the motion to compel disclosure of the source code, which it reviewed under an “abuse of discretion” standard as a discovery order, the Appellate Court noted that the parties’ experts provided conflicting testimony regarding the plaintiff’s need for the information in view of other disclosures on the “trustworthy claim” and concluded that the trial court was entitled to accept the testimony of Yelp’s expert. The trial court also accepted Yelp’s expert testimony to the effect that the source code was not necessary for the “scope” claim.
The trial court excluded Demetriades from the portion of the trial dealing with Yelp’s trade secrets, during which Multiversal’s expert would be present to assist counsel. Demetriades, the trial court noted, was the Chief Executive Officer of what he dsecribed as the “largest integration software company in the world” who had “also owned and been on the board of other software companies.” In sum, according to the Appellate Court, the trial court “acknowledged Yelp’s concern that protective order restricting Demetriades from disclosing Yelp’s trade secret information would be nearly impossible to enforce because he could use the information to subvert Yelp’s recommendation software without detection.”
The Appellate Court agreed and rejected Multiversal’s argument that excluding Demetriades constituted a denial of due process. The plaintiff is represented by Ervin Cohen & Jessup. Yelp is represented by Davis Wright Tremaine.
