F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

B O R I S Y. L E V I T T , on behalf of himself and all others similarly situated, DB A Renaissance Restoration; C A T S A

N D D O G S A N I M A L H O S P I T A L , I

N C

. ; T R A C Y C H A N , DB A Marina Dental Care; J O H

N M E R C U R I O , DB A W heel Techniques,

Plaintiffs-Appellants
,

v.

Y E L P ! I N C ., Defendant-Appellee

. No. 11-17676

D .C. Nos. 3:10-cv-01321-EMC 3:10-cv-02351-EMC

OPI NI ON

A ppeal from the United States District Court for the Northern District of California Edward M. Chen, District J u dg e, Presiding

Arg ued and Submitted J uly 11, 2013—San F rancisco, California

F iled September 2, 2014

B efore: Richard A. Paez , Marsha S. B erz on,

a nd Richard C. Tallman, Circuit J udg es.
Opinion by J udg e B e rz onL E V I T T V

. Y E L P ! I N C

. 2

SUMMARY *

Calif o rnia Unf

air Com petition Law / Civil Extortion

The panel affirmed the district court’s d i s missal of an action by small business owners alleg ing that Yelp! I nc.

ex torted o r attempted to ex tort advertising pay ments from them by manipulating user reviews and p e n ning neg ative reviews of their businesses in violatio n of California state law.

The p anel held that the business owners f ai l ed to state a claim for ex tortionate, and the r e f ore unlawful, business practices in violation of California’s Unfair Competition L aw because, u nder the Hobbs Act and Californi a l a w , unless a pers o n h a s a p re-ex isting rig ht to be free of the threatened economi c h arm, threatening economic harm to induce a p e r s o n to pay for a leg itimate service is not ex tortion. The panel held that, g iven these string e n t requiremen t s, the busi ness owners failed sufficiently to alleg e that Yelp
wrong fully threatened economic loss by manipulating use r reviews. I n a ddition, the business owners did no t a lleg e sufficient facts to support their c laim t h a t Y e lp authored
neg ative user reviews of their businesses.

The panel held that the business owners also failed to state a claim for unfair business practices i n v i olation of the UCL

.

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.L E V I T T V

. Y E L P ! I N C

. 3

I n a ddition, the business owners f ailed to state a claim for civil ex tortion or attempted civil ex tortion under California law.

COUNSEL

L aw r e n ce D ale Murray (arg ued), J o hn Henning I I I
, a nd Robert C. Strickland, Murray & Asso c i ates, San F rancisco, California, for Plaintiffs-Appellants.

S. Ashlie B ering er (arg

ued) and Molly

Cutler, Gibson Dunn & Crutcher, Palo Alto, California; Gail Ellen L ees, G i b son Dunn & Crutcher, L os Ang eles, California; and Aaron Schur, Yelp I nc., San F rancisco, California, for Defendant-Appellee.

OP INION

B ERZ ON, Circuit J udg e :
Today
, individuals c an share their o pinions w ith the entire world courtesy of a few taps on the key b oard. T h e a

ppellee in this c ase, Yelp! I nc. ( “Yelp”), provides an online forum on which its users ex press opinions as to services rang ing from dog walkers to taco trucks.

The appellees, B o ris L evi t t , Cats and Dog s Animal Hospital, I nc. (“Cats and Do gs ”), J ohn Mercurio, and Dr. Tracy C h a n, are small business owners (collectively
, “the business owners”) who alleg e that Yelp ex torted or attempted
to ex tort advertising pay ments from t h em by manipulating

user reviews and penning neg ative reviews of their businesses. The business owners f iled a class-action lawsuitL E V I T T V

. Y E L P ! I N C

. 4

ag ainst Y elp for violations of Californ i a ’ s U n f a i r C o mpetition L aw (“ U C L ”), California B u siness & Professions Code § 17200 et seq. , civil e x tortion, a nd attempted civil e x tortion.

The district court dismissed the lawsuit for failure to state

a c l a im. We review the dismissal de novo, see W ilson v

. Hewlett-Packard Co.
, 668 F .3d 1136, 1140 (9th Cir. 2012), and, hold i n g t hat the facts and leg al theories alleg ed in the business owners’ c omplaint a r e insufficient to make o ut a prima facie case of unlawful o r u n fair business practices
ag ainst Yelp, affirm.

I.

A. Yelp’s Service

Yelp p rovides an online directory t h a t a llows reg istered

users to post reviews and rank businesses on a scale of one to five stars. B ased on these user ranking s, Yelp then assig ns businesses an overall “star” rating

. B usinesses c annot opt out of being listed on Yelp.

Not a ll u ser reviews submitted appear o n a b usiness’s Yelp p ag e or remain there after initially appearing

. Reviews

c a n be r emoved by the reviewer, removed by Yelp fo r violating Y elp’s “Review Guidelines” or “Terms of Service,”

or removed b y an automated filtering software maintained b y Yelp. Acc o rd ing to Yelp’s website, its filtering sy stem operates as follows:

Th[ e] sy stem decides how establ i s hed a particul ar reviewer is and w hether a r eview will be shown based on the reviewer’s involvement on Yelp. W hile this may seemL E V I T T V

. Y E L P ! I N C

. 5

unfair

. . . t h is sy stem is d esig ned to protect both consumers and businesses al ike f rom fake reviews (i.e., a malicious revie w from a

c o mpetitor or a planted review from an employ ee). The p rocess is entirely automated
to avoid human bias, and it affects both positive and neg ative reviews. I t’s important
to note that these r eviews are not deleted (they

are alway s shown on the reviewer’s public profile) and may reappear o n y ou r b u siness
pag e in the future.

Yelp a lso offers b usi n esses advertising opportunities on its webs ite for $300 to $1200 per month. Purchasing advertising allows a business to: appear in a d v e r tisements display ed a

bove Yelp search results and on related b u siness
pag es; prevent competitors’ advertis e ments from appearing

on its Yelp pag e listing ; enhance its pag e listing with p hotos; and promote a favorite review to the top of its pag e. 1

B. The Allegations Against Yelp

The business owners maintain that Yelp c reated neg ative reviews of their businesses a n d m anipulated review a nd rating s content to induce them to p u r chase advertising throug h Yelp. They u r ge t hat Yelp has thereby violated the UCL throug h acts of ex tortion and, when not su c c essful in inducing pay

ments to Yelp, att e m p t e d ex tortion. They also

1 Yelp s tates t

h at th e s p ecif

ic b en ef its o f ad v ertisin g “ h av e ch an g ed

so m ew h at o v er tim e.” Fo r ex am

p l e, Yelp n o lo n g er p erm its b u sin esses to h ig h lig h t a “ f

av o rite rev iew ” an d n o w o ffers a “ v id eo f eatu re” f or ad v ertisers’ Yelp p ag es.L E V I T T V

. Y E L P ! I N C

. 6

alleg e separate causes of action for civi l ex tortion a nd attempted civil ex tortion.

The business owners seek to represent two subclasses of businesses: those that declined to advertise with Yelp (“nonsponsors”), and tho s e t h at have, at some point, purchased advertising ( “sponsors”). T h ey support their claims by alleg ing that “ap p r ox imately 200 Y elp employ ees or individuals acting on behalf of Yelp have written reviews of businesses on Yelp” a nd that Yelp’s C h i e f Ex ecutive Officer admitted to a New York T imes reporter that Yelp has paid users to write reviews, althoug h it does not do so directly
any more.

The Third Amended Complaint contains the following plaintiff-specific alleg ations:

a. Boris Levitt

L evitt, the o wner of a furniture r estoration business, alleg ed that several p ositive reviews disappeared from his business’s Yelp pag e , causing th e o v e r all star rating o f his business to decline. L evitt c ontacted Yelp to ask w h y a certain positive review had d isappeared from his b usiness’s
pag e a nd was told b y a Ye l p a ge n t that she could not assist him.

Two months later, a Yelp sales r epresentative contacted L evitt to invite him to advertise w i t h Y elp. L evitt declined, stating that he already had a “ hig h v olume of users reviewing his business pag e” and “an overall rating of 4.5 stars.”

A c cording to L evitt, two day s after he declined t o purchase advertising
, several five-star r eviews disappea r e dL E V I T T V

. Y E L P ! I N C

. 7

from his pag e, leaving his business with an overall star rating of three-and-a-half stars. L evitt a s s e rted that “Yelp manipulated the reviews of [ h is] business because he did not purchase a dvertising ,” a

nd did so “as a threat” made to induce him to purchase advertising

. As a result of the lower overall rating
, L evitt alleg e d, his business reputation and r e v enues declined.

b. Cats and Dogs Animal Hospital

Cats and Dog s is a

n animal hospital in Santa B arbara. I ts alleg ations center on reviews from two neg ative users.

Cats and Dogs contacted Yelp to request removal of the first neg a tive review, posted b y Yelp user “Chris R.,” because the review referred to a v is i t that occurred outside of Yelp’s twelve- month policy

. That review was subsequently removed, b ut another n eg ative review from a d i f ferent user, “Kay K.,” showed up soon afterwards on the Cats and Dog s Yelp pag e.

Cats and Dog s states that “soon after the appearance o f these neg ative reviews, [ it ] beg an receiving frequent, hig h

pressure calls from Yelp sales representatives, who promised
to manipulate [ Cats and Do g s’] listing pag e in ex chang e for [ Cats and Dog s’] purchasing

. . . a dvertising .” Cats a nd Dog s alleg ed it received a call f

r om a Yelp sales representative w ho stated tha t Yelp would “hide neg ative reviews” or “place them lower on [ Cats and Dog s] listing pag e” if Cats and Dog s purchased advertising

. Cats a n d Dog s declined. A ccording
to Cats a nd Dog s, a week after it r e jected this p a r t icularly

ex p l icit advertising pitch, the Chris R. review reappeared, followed by a second neg ative review from K ay K. Cats a nd Dog s a lleg ed that “Yelp re-posted the ‘Chris R’ and two ‘ KayL E V I T T V

. Y E L P ! I N C

. 8

K’ reviews a

nd/or manufactured its own reviews to instill fear in [ Cats a

nd D og s] to advertise.” Cats and D og s f urther alleg ed that “[ a] s a result of Yelp’s c onduct,” Cats a nd Dog s’ business revenues and reputation were injured.

c. Mercurio

Mercurio o wns W heel Te c hniques, an automobile body repair shop. H e alleg e d that Yelp posted “false r e views,”

m e a ning reviews not composed by actual customers, “a s a threat to induce W heel Techniques to advertise. ” He based his alleg ation on the appearance of “neg ative r eviews

. . . on W h eel T e chniques’ Yelp r eview pag e” that did not correspond t o customer records and contemporaneous “telephone calls from Yelp request i n g that [W heel Techniques] purchase advertising .”

Mercurio stated that h e “called Yelp to inquire about why

one of his competitors, known in the industry for its ‘ s h o t ty [ sic] work,’” had a hig h overall star r ating

. Y e l p alleg edly responded that the competitor a dv ertised and that “[ Yelp] work[ s] with y our reviews if y ou advertise with us.” L ater, when Mercurio declined an offer to advertise on Yel p , he alleg es that “[ w] ithin minutes,” “a one-star review was moved to the top of [ W heel T e chniques’] Yelp review pag e

. . . a s a threat to c ause W heel Techniques to fear that if it did not pay Yelp money to advertise, the neg ative review would remain at the top of its Yelp review pag e.”

Mercurio also alleg ed that he “was told

. . . that a former Yelp employ ee stated that Y e l p

. . . terminated a g roup o f sales employ ees

. . . a s a r es u lt of scamming related to

a d v e rtising

. ” The Third Amended Complaint does not indicate who told Mercurio t h i s information, nor does itL E V I T T V

. Y E L P ! I N C

. 9

identify the Y elp employ ee who alleg edly made the orig ina l

s t a tement or o f what the “scamming related to advertisin g” consisted.

d. Dr. Tracy Chan

Chan, a dentist, stated that she received calls from a Yelp sales representative “offer[ ing ] h er l o t s of benefits, such a s the opportunity to keep Chan’s business r ating s h i gh b y hiding or bury ing bad reviews,” if she advertised with Yelp. Ac c ording to Chan, the sales representative stated that “althoug h many Yelp reviews were manipulated by a computer sy s t e m, Yelp employ ees also had the ability to remove reviews from a business’s Yelp pag e.”

Chan initially declined to purchase a dvert ising from Y elp. Two or three day s after doing so, “Yelp removed nine 5-star reviews” from her pag e, causing her over a l l r ating to drop from five to three stars. Chan called Yelp to a s k a b o ut the decline in her overall rating
, a nd was told that “Yelp ‘tweaks’ the rating s every so often and that [ Yelp] could help h er if she sig ned up for advertising

services with Yelp.” Chan alleg ed that “Yelp removed positive reviews

. . . as a threat to cause Chan to fear that i f s h e did not purchase advertising

. . . her business’s overall star rating would stay

low.”

“[ O] ut of fear of further manipulations,” Chan sig ned an advertising contract with Yelp. According to Chan, just day s after sig ning the contract, her “ov er all rating increased to 4 stars and various five star reviews were reinstated by Yelp.” She believes the rating increase was the result of her ag reeing to advertise with Yelp.L E V I T T V

. Y E L P ! I N C

. 10

Several months later, a Yelp sales ag ent ask ed Chan whether she was interested in increasing her advertising purchase with Yelp. W hen Chan declined, she “noticed that her reviews w ere ag ain declining .” That same month, Chan cancelled her ex isting advertising contract with Y elp. Chan alleg ed that after she cancelled, “Yelp removed positive reviews

. . . and replaced them with neg ative r e v i e ws

. . . to

cause Chan to fear that if she di d not pay Yelp for advertising
, Y elp would continue to remove positive reviews from her [ pag e] .”

Chan’s overall rating fluctuated over the nex t y ear and a half. She attributed dips in her rating to specific interactions with Yelp. F o r e x a m p le, Chan stated that Yelp “removed several positive r eviews,” prompting her to “ post a neg ative review about Yelp’s conduct” on her Yelp pag e. “W ithin two to three d ay s,” she alleg e d, Y el p r emoved more positive reviews, causing her overall r ating to “[ fall] to 3 stars.” Over

a y e a r l a ter, Chan alleg ed that her overall rating fell ag ain, this time from four stars to three a n d a half stars, when “Yelp removed six positiv e r ev i ews” from her pag e a fter she “posted a neg ative review about Yelp to h e r o w n website.” Chan asserted that the removal of positive reviews w as done “to induce [her] to pa y f

o r advertising a

nd/or to discourag e her from posting neg a tive information about Yelp.”

C. District Court’s Rulings

The district court dismissed the business owners’ Second Amended Complaint for failure to state a claim up o n w h i c h relief could be g ranted. W ith respect to the business owners’ claim that Yelp’s cond uct violated California’s UCL
, the district court ruled that: theories of ex torti o n for f ailure to

remove neg ativ e u ser r eviews were covered by Yelp’sL E V I T T V

. Y E L P ! I N C

. 11

i m m unity under the Communications Decency Act of 19 9 6 (“CDA”), 47 U.S.C. § 230(c)(1); there were insufficient facts from which to infer th at Y e l p authored or manipulated the
neg ative reviews and ra t i n g s; and there were insufficient factual alleg a tions f

rom which to infer communication of an

ex tortionate threat.

After the b usiness owners a mended their complaint to fix th e s e deficiencies, the district court ag ain dismissed it for failure to state a c laim. Describing the alleg ations that Yelp manufactures neg ative reviews as “ e ntirely speculative,” the district court concluded that t h e T h ird Amended Complaint failed to alleg e facts sufficient to support a conclusion that Yelp authored content. Even assuming Yelp employ e es h ad authored r eviews, the district court found only “a mere possibility ” t h a t Yelp authored content to ex tort advertising
pay ment s

. The district court further found that “alleg ations based o n Y elp’s purported manipulati on of user-g enerated content” were immuniz ed by the CDA. The s e p a r a t e civil

ex tortion and a ttempted civil e x tortion claims f ailed for the

same reasons.
This appeal followed.

II.

The business owners maint a in that Yelp attempted to

ex tort and did ex tort advertisin g pay ments from them b y wrong fully threatening them with e conomic loss. W e hold that the b usiness owners have failed to state a c laim under California law on which relief can be g ranted. According ly
, we do not address Yelp’s d efen s e o f i mmunity under the CDA.L E V I T T V

. Y E L P ! I N C

. 12

A. Calif ornia’s Unf

air Com petition Law

California’s Unfair Competition L aw prohibits “any unlawful, unfair or f

raudule n t b usiness act or practice a nd unfair, deceptive, untrue o r misleading advertising .” Cal. B us. & Prof. Code § 172 0 0

. “ [ I ]t establishes three varieties of u nfair competition — a c ts or practices which are unlawful,

or unfair, or f

r a u d u l e nt.” Cel-Tech Commc’ns, Inc. v. L.A. Cellular T

el. Co.
, 20 Cal. 4th 163, 1 80 (1999) (internal quotation marks omitted).

I n p rohibiting “any unlawful” business practice, the UCL “borrows violations of other laws and treats them as unlawful practices that the unfair co m p e t i t i o n law makes independently actionable.” Id. ( internal quotation marks omitted); see also Davis v

. HSBC Bank Nev., N. A

. , 6 9 1 F .3d 1152, 1168 (9th Cir. 2012). The business owners pre mise their “unlawful” UCL claim on Yelp’s alleg edly ex tortionate conduct.

Specifically
, they a ll e ge that the following conduct
amounts to ex tortion: (1) Yelp manipu l a ting user-g enerated reviews to induce them to buy advertising ; and (2) Yelp creating its own neg ative reviews o f their businesses to induce them t o buy advertising

. T hey do not assert any claims b ased on f

ailure to remove n eg ative third-party reviews of their businesses.

W e c on c l u de, first, that Yelp’s manipulation o f user reviews, a s suming it occurred, was not wrong ful use o f economic fear, and, second, that the business own e r s p led insufficient f

acts to make o u t a p lausible c laim that Yelp authored n eg a tive r eviews of their businesses. According ly
, w e ag ree with the district c ourt that these alleg ations do no t support a claim for ex tortion.L E V I T T V

. Y E L P ! I N C

. 13

B. Unlaw f

ul (Extortionate) Business P ractices

W e f irst consider w hether the business owners have stated

a claim of ex tortionate
, and therefore unlawful, business practices under California’s UCL

.

1

The H o b bs Act defines e x tortion as “the obtaining o f property from another, with his consent, induced by wrongful

use of actu a l or threatened force, v iolence, or fear, or under colo r o f official rig ht.” 18 U.S.C. § 1951(b)(2) (emphasis added). Threats of economic har m made to “obtain[ ]

. . . property from another,” id.
, are n o t g enerally considered “wrong f ul,” id.
, where the a lleg ed ex tortioner has a leg itimate claim to the property obtained t h roug h such threats. Brokerage Concepts, Inc. v. U.S. Healthcare, Inc.
, 140 F .3d 494, 523 (3d Cir. 1998). T h erefore, unless a person h as a preex isting rig ht to be f

ree of the threat e n e d e conomic harm, threatening economic harm to induce a p e r s o n to pay for a leg itimate service is not ex tortion. See U nited States v. V

igil
, 523 F .3d 1258, 1265 (10th Cir. 2008) (citing United States v

. Enmons
, 410 U .S. 3 96, 400 (1973)); Viacom In t e r n

. Inc. v

. Icahn , 747 F . Supp. 205, 213 (S.D.N.Y. 1990).

Enmons is the starting point for the inter p r e t a t ion o f “wrong f ul” in the ex tortion sta t u t e

. 410 U.S. 396 (1973). Enmons held that the use of violence in a labor strike to obtain h ig her wag e s and other benefits did not c o n stitute

ex tortion u n d e r the Hobbs Act. Id. at 400. I n so holding
, Enmons ex plained that “[ t] he term ‘wrong ful,’ whic h

. . . modifies the use of each of the enumerated means o f obtaining property — actual or threatened force, violence, o r fear — would be superfluous if it only served to describe theL E V I T T V

. Y E L P ! I N C

. 14

means used.” Id. at 3 9 9

. “Rather, ‘wrong ful’

. . . limits the statute’s co v e r a g e to those instances where the obtaining o f the property w ould itself b e ‘w ro n g ful’ because the alleg ed

ex tortionist has n o lawful claim to that property .” Id. at 400. Thus, Enmons concluded that the “[ H o b b s ] Act does not apply to the use of force to achieve leg itimate labo r ends.” Id. at 401. E

nmons ’ reasoning “created the claim o f r i gh t defense to charg es of ex tortion under the Hobbs Act.” United States v. Sturm , 870 F

. 2d 769, 772 (1st Cir. 1989).

As to violent threats, we have “declined to ex tend E n mons bey ond the contex t o f a l abor dispute,” United States v

. Daane
, 4 75 F .3d 1114, 1 119 (9th Cir. 2007), “read[ ing ] Enmons as holding only that the u s e o f violence to secure leg itimate collective barg aining o b j ectives is bey o nd the reach of the Hobbs Act,” Un i t e d States v. Thordarson
, 646 F

. 2 d 1 3 2 3, 1 327 (9th Cir. 1981). W e h ave also
recog niz ed that, aside from violence, “ s ome attempts to obtain property

. . . are so inherently wrong ful that whether the defendant had a lawful claim to the property demanded is
not relevant in determining whether ex tortion or attempted

ex tortion has been proven.” United State s v. Villalobos
, 748 F .3d 953, 956 (9th Cir. 2014).

Th o u gh the claim-of-rig ht defense has been limited in other contex ts, see id. , it continues to apply to alleg ations of

ex tortion involving threats of economic harm. So long as the alleg ed e x tortioner seeks pay ment for services that have some “objective value,” Viacom
, 747 F

. Supp. at 212, n .7, he has “a lawful claim to the property obtained.” Brokerage Concepts
, 140 F .3d at 524. Consequently
, barring any “preex isting rig ht
to be free of the e conomic fear

. . . utiliz ed” on the part of the
t h reatened party , United States v

. Tobin
, 155 F .3d 636, 640 (3d Cir. 1 998), “purely economic t h re ats” do not v iolate theL E V I T T V

. Y E L P ! I N C

. 15

Hobbs Act, id. ; see also George Lussier E n t e r s., Inc. v

. Subaru of New England, Inc.
, 393 F .3d 36, 50 (1st Cir. 2004).

I n Brokerage Concepts
, fo r e x ample, the Third Circuit

c o nsidered whether pay ments received by a h ea l t h maintenance org aniz ation (“HMO”) were the product o f

ex tortion by wrong f

ul u se of economic fear. 140 F .3d at 501. I n that c ase, the H MO refused to a p p r o ve a pharmacy branch’s application to join the HMO’s network of medical prescription providers u nless t he branch discontinued its contractual relationship with a particular he a l t h care consulting f

irm and g ave its bu s i n ess to one of the HMO’s subsidiaries. Id. The HMO also applied various “ hard-ball”
neg otiation tactics, such a s auditing a nd putting a “freez e” on the p harmacy ’s other locations, wh i c h h ad previously been approved to join the HMO’s n e t w o rk. Id. at 501, 506. Eventually
, the pharmacy branch a cquiesced, dropped its

ex isting h ealthcare consulting firm, and made pay ments to the HMO’s subsidiary

. Recog niz ing the undoubted v alue of access to the HMO’s network, Brokerage Concepts c oncluded that the pay ments to the HMO’s subsidiary were not the product of ex tortion. Id.
at 525–26. No law prohibited the HMO from conditioning

a c c e s s to its network on such p a y ments, and the pharmacy had no “rig h t” to access the network. Id. at 526. B rokerage Concepts therefore d eclined to interpret a “ mutually beneficial e x chang e of property ” between “ two private parties” as “the wrong ful use of economic fear.” Id.

Similarly
, in Sturm
, the F i r s t C i rcuit held that “the term ‘wrong ful’ r e q u i res the g overnment to prove, in cases involving ex t o rtion b ased on economic fear, that the defendant k

new that he was n ot leg ally entit led to theL E V I T T V

. Y E L P ! I N C

. 16

property that he [ tried to obtain] .” 870 F .2d at 774. I nsisting that “ hard barg aining ” does n ot amount to ex t ortion, the Seventh Circuit has likewise concluded that “[ w] h ere the defendant has a claim o f rig ht to property and ex e rts economic pressure to obtain that property , that conduct is not

e x tortion and no violation of the Hobbs Act has occu r r e d

. ” Rennell v. Rowe
, 635 F .3d 1008, 1011, 1 012 (7th Cir. 2 011); see also United States v. Capo , 791 F .2d 1054, 1062–63 (2d Cir. 1986) (noting “that fear of economic loss p lay s a r ole in
many business transactions that a re entirely leg itimate” a nd therefore the H obbs Act reaches only “the ex p loitation of the fear of economic loss in order to obtain property to which the

ex p loiter is not entitled”), v acated in part on other grounds
, 817 F .2d 947 (2d Cir. 1987) (en banc).

As t o w h at one may threaten to do in the economic
contex t, Rothman v. Vedder Park Management
, is instructive. 912 F .2d 3 15 (9th Cir. 1990). I n that case, a g roup o f tenants sued the owner and operator of a mobile-home p ark, claiming the owner violated the Racketeer I nfluenced and Corrupt Org a niz ations Act, 18 U.S.C. §§ 1 961–6 8
, by using

ex tortionate tactics to induce them to sig n leases. Id. a t 316. W e considered, under both the Hobbs Act and California law, whether alleg e d threats that non-s i gn er s would have to pay their o wn utility b ills a n d w ould be subject to future rent increases of undisclos e d amounts were wrong f ul. Id. at 317–18.

W e c oncluded that these threats were n o t wrong ful a nd therefore not ex tortionate. I d. a t 318. B ecause the tenants did
not alleg e that the park owner “ may not raise the rent of those who have not sig ned the lease o r that it may not refuse to pay their utility

bills,” the tenants had no pre-ex isting rig ht to be free of such threats. Id. Moreover, althoug h the park ownerL E V I T T V

. Y E L P ! I N C

. 17

threatened to raise the rent, he had a rig ht to condition use o f his mobile-home park on pay ment. Id

. The threats alleged did not, therefore, a mount to ex tortion. I d. I n so holding
, we relied on the “g eneral r u l e ” that “what y ou may do in a certain event y ou may threaten to do, that is, g ive warning o f
y our intention to do in that event, a nd thus allow t h e o ther
person the chance of avoiding the consequences.” Id

. (quoting McKay v. Retail Auto. Salesmen’s Local Union No. 1067 , 16 Cal. 2d 311, 321 (1940)).

Sosa v. D IRECTV, Inc.
, is similarly instructive. 437 F .3d 923, 939–40 (9th Cir. 2006). I n t h a t case, we considered whether claim-settlement letters sent by DI RECTV constituted “ex tortion” within the meaning of the Hobbs A ct and California law. Id. at 939. W e declined to adopt a broad construction of the Hobbs A ct, noti n g that while “[ i] t is certainly possible, perhaps even likely
, that the threat of being faced with a costly la w s u i t induced ‘fear’ in [ the p laintiffs]
,

. . . ex tor t ion requires more than fear.” Id. (citing Rothman
, 912 F .2d at 318). W e emphasiz e d that “[ t] he use of the fear must be ‘wrong ful.’” I

d. (citing Rothman
, 912 F .2d at 318). And, althoug h “the assertion of w eak claims predicated on unsupportable factual alleg ations may b e said in some sense
to be wrong ful,” we rejected a rea d i n g o f either the H obbs Act or California ’ s e x tortion statute that would impose liability for “threats of litig ation where the asserted claims do not rise to the level of a sham.” Id. at 939–40. 2

L ike the Hobbs Act, California law states that “[ e] x tortion is the obtaining of property from another, with his consent

. . .

2 O u r h o ld in g in S

o sa w as also in f

l u en ced by th e n eed to av oi d a n in terp retatio n o f ex t o rtio n th at w o u ld im p in g e o n th e d ef

en dan t’ s First A m en d m en t rig h ts. Id

. at 9 4 0

.L E V I T T V

. Y E L P ! I N C

. 18

induced b y a wrongful use of f orce o r f ear.” Cal. Penal Code § 5 1 8 (emphasis added). California law also provides th at “[ f] ear, such as will constitute ex tortion, may be induced b y

a threat

. . . [ t] o d o an unlawful injury to the p erso n o r property of the individual threatened,” id. § 519(1) (emphasis added), “thus ex cluding fear induced b y threat to d o a lawful injury ,” People v. Beggs
, 178 Cal. 79, 83 (1918); see also In

re Nichols
, 82 Cal. App. 73, 77 (Dist. Ct. App. 1927). Accordingl y , the elements of e x tortion under federal a nd California law are substantially the same. See Sosa
, 437 F .3d
at 9 3 9–40; Rothman
, 912 F .2d at 317–18. The plaintiffs here point to no pertinent distinctions between the f e d eral a nd California statutes. 3

I n sum, to state a claim of e conomic ex tortion under both federal a nd California law, a litig ant must demonstrate either that he had a pre-ex isting rig ht to be free from the threatened harm, or that the defendant had no rig ht to seek pay ment for the service offered. Any less string ent s t a n dard would transform a wide variety of leg ally acceptable b u s i n ess dealing s into ex tortion.

2

Given these strin g ent r equirements, the business owners in this case failed sufficiently to alleg e that Yelp wrongfully threatened economic loss by manipulating user reviews.

3 A lth o u g h w e h av e n o ted th at C alif o rn i a d o es n o t h av e a claim

- o f

- rig h t d ef en se, s ee Go m e z v

. Ga rcia
, 81 F.3 d 9 5
, 97 (9 th Cir. 1 9 96 ), th e state

au th ority w e relied o n f o r th at co nc l u s i o n d id n o t in v o lv e th reats of

eco n o m ic h arm , see, e.g

. , Beg g s , 1 7 8 Cal. at 8 3 (th reats to accu se a p erso n

o f a crim e); Peo

p le v

. S e r r a n o , 1 1 C al. A p p

. 4 th 1 6 7 2
, 1 6 7 8 (Ct. A p p

. 1 9 9 2 ) (reco v erin g d eb t b y k id n ap p in g an d h o ld in g a p erso n f o r ran s o m ).L E V I T T V

. Y E L P ! I N C

. 19

To star t, we note that there is no a lleg ation that Yelp directly threatened economic harm if the business owners refused to purchase advertising packag es from Yelp. Wh i le the lack o f such ex press threats does not alone dispose of the

ex tortion claims, see Uni t e d States v

. Marsh
, 26 F .3d 1496, 1501 ( 9th Cir. 1994), it does make the business owners’ case

con s iderably more difficult. Absent ex plicit threats o f economic h a

rm, the business owners must a lleg e sufficient facts to support the inference, In re Century Alu m i n u m Co. Sec. Litig

. , 7 2 9 F .3d 1104, 1107 (9th Cir. 2013), that Yelp “inten[ ded]

. . . to induce pay ment throug h the use of threats

or the ex ploitation o f [ economic] f ears,” Unit e d S t a tes v

. Greger , 716 F .2d 1275, 1278 (9th Cir. 1983).

W e beg in with Chan, who alleg es that Yelp ex torted her by removing p ositive revie w s f rom her Yelp pag e. Chan
asserts that she was d eprived of the b enefit of the posit i v e reviews Yelp users posted to Y elp’s webs i t e , and that, h ad she received the benefits of the p ositive reviews, they would have counteracted the neg ative reviews other users posted.

B u t Chan ha d n o p re-ex isting rig ht to have positive reviews appear on Y elp’s website. She alleg es no contractual rig ht pursuant to which Yelp must publish positive reviews, 4

nor does any law require Ye l p to publish them. B y withholding the benefit of these p o s itive reviews, Yelp is withholding a benefit that Yelp makes possible a nd maintains. I t has no oblig ati o n t o d o so, however. Chan does not, an d could n ot successfully
, maintain that removal

4 Ch an alleg es th at sh e p u rch ased ad v ertisin g af ter a Y elp rep resen tativ e to ld h er th at Yelp co u ld “ t w eak ” h er rev iew s i f sh e ad v ertised w ith Yelp

. B u t Ch an d o es n o t alleg e th at th is p led g e w as p art of h er ad v ertisin g

co n tract w ith

Yelp

.L E V I T T V

. Y E L P ! I N C

. 20

o f p o sitive user-g enerated reviews, by itself, violates a ny thing other than Yelp’s own purported practice. “[ W ] hat [ Yelp]
may do in a cert a i n event [ Yelp] may threaten to do.” Rothman
, 912 F .2d at 318. Moreover, Chan does not a lleg e that the advertising Yelp s old her was a valueless sham, o r that she w as a lready e n titled to the advertising privileg e s Yelp induced h er to buy

. S e e Viacom
, 747 F

. Supp. at 212 n.7. W e thus “deal with a v ery narrow subset of the potential universe of ex tor t i o n cases: one involving solely the accusation of the wrong f

ul us e o f economic fear w here two private parties have eng ag ed in a m u tually beneficial

ex c h a nge o f property

. ” Brokerage Concepts
, 140 F .3d at 525–26.

As Chan alleg es no i n d e p e ndent barrier to the rating smanipulation o f which she c o m p l ains, and as there is no alleg at i o n that Yelp’s advertising services are, objectively
, worthless, see Viacom
, 747 F . Supp. at 212 n.7, any implicit threat by Yelp to remove positive reviews absent pay ment for

a d v e r t ising was not wrong ful within the meaning of the

ex tortion statutes.

This conclusion is not entirely the end of t h e m a tter, a s Chan alleg e s that the rating s manipulation neg atively affected her “business’s r eputati o n

. ” B ut Chan does not connect her claim of reputational h arm to a specific a lleg a tion o f
wrong ful c onduct. 5 W e note, too, that u n lik e t h e other

5 B y th e ref

eren ce to rep u tatio n al in

j u ries, th e bu sin ess o w

n ers m ay h av e

m ean t to in v o k e t

rad e lib el law as t

h e b asis f o r th e w ro n g f u ln ess elem en t

o f ex to rtio n

. B u t as th e b u sin ess o w n ers h av e n o t p led th e o th er elem en ts

o f trad e lib el, see Greg o ry v. McDo n n el Do u gla s Co rp

. , 1 7 Cal. 3 d 5 9 6
, 6 0 0 (1 9 7 6 ); C

ity o f Co sta M esa v. D ’Alessio In vs., LLC
, 2 14 C al. A p p

. 4 th 3 5 8
, 3 7 5

– 7 6 (Ct. A

p p

. 2 0 1 3 ), w e d o n o t d ecid e w h eth er a su f

f icien tL E V I T T V

. Y E L P ! I N C

. 21

business owners, Chan at one time had a contractual relationship with Yelp. I t may be that by manipulating Chan’s rating s to induce her to increase her a d vertising do llars, Yelp “breached [ its] duties u nder the contract[ ]

. ” Rennell
, 6 35 F .3d at 1014. “B ut those claims should be pursued throug h state-law theories of contract

. . . — not [ ex tortion] .” Id.

Chan’s pleading s thus fail to alleg e that deflati o n of her business’s overall rating resulting from removin g p ositive reviews constitutes “ wrong ful” c o nduct, and she therefore fails to state a claim of economic ex tortion.

L evitt and Mercurio similarly a lleg e that Yelp attempted
to ex tort them by removing positive user re v iews. As with Chan, such alleg ations are insuffic i e n t to show that Yelp threatened them wrong fully

.

The other brand of ex tortionate rating s manipulation the business owners alleg e is the re-posting o f n e g ative reviews

a n d the placement of neg a tive reviews at the top of t h e business owners’ Yelp pag es. B usiness owners Mercurio a nd Cats and Dog s bring these alle ga t i ons. Here, too, however, Cats and Dog s and Mercurio h ave no claim that it is independently wrong ful for Yelp t o p o s t and arrang e actual

user reviews on its website as it sees fit. The business owners may d e em the posting or order of user reviews as a threat o f economic harm, but it is not u n l a w f u l for Yelp to post a

nd
sequence the reviews. As Yel p h a s t h e rig ht to charg e for leg itimate advertising services, the threat of econo m i c harm that Yelp leverag ed is, at most, hard barg aining

.

alleg atio n o f trad e lib el co u l d su p p ly th e w

ro n g f u l n ess elem en t f

or

ex to rtio n p u rp o s es.L E V I T T V

. Y E L P ! I N C

. 22

C. Yelp’s Alleged Authoring of Negative Review s

W e nex t consider whether t h e b u siness owners have adequately pled a claim of ex tortion based on Yelp’s alleg ed authoring of neg ative reviews.

To survive a motion to dismiss for failure to state a claim after the Supreme Court’s d ec isions in Ashcroft v. Iqbal
, 556 U .S. 662 (2009) a

n d Bell Atlantic Corp. v. Twombly
, 550 U.S. 544 (2007), the b usiness owners’ factual alleg ations “must

. . . s u gg est that the claim has at least a plausible chance of success. ” I

n re Century Aluminum
, 729 F .3d at 1107. I n other w o r d s , their complaint “ must a lleg e ‘factual
content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleg ed.’” Id. (quoting Iqbal , 556 U.S. at 678).

F ollowing Iqbal and Twombly
, we have attempted to reconcile t h e p lausibility standard as set out in those ruling s with the more lenient pleading standard the Court has also, at times, applied. See Eclectic Props. E., LLC v

. Ma r c us & Millichap Co.
, 7 51 F .3d 990, 9 96 (9th Cir. 2014) ( c iting Swierkiewicz v

. Sorema, N.A.
, 534 U.S

. 5 06 (2002) a nd Erickson v. Pardus
, 551 U.S. 89 (2007) (per curiam)). W hile
recog niz ing some tension among the Court’s pleading

standards cases, we h ave settled o n a two-step process for evaluating pleading s:

F irst, t o be entitled to the presumption o f
t r u t h
, a l l e ga t i o n s i n a c o m p l a i n t o r counterclaim may not simply r e cite the elements o f a c ause of action, but must conta in sufficient alleg a tions of underly ing facts to g ive fair noti ce and to enable theL E V I T T V

. Y E L P ! I N C

. 23

opposing party to defend itself effectively

. Second, the factual al leg a tions that are taken

as true must plausibly sug g est an ent i t l e ment to relief, such that it is not u nfair t o r e q u ire the oppos i n g p arty to b e subjected to the

ex p ense o f discovery and continued litig ation.

Id. (quoting S

tarr v. Baca
, 652 F .3d 1202, 1216 (9th Cir. 2011)). I n all cases, evaluating a complaint’s plausibili t y is

a “ contex t-specific” e ndeavor that requires courts to “ draw on

. . . j u d i cial ex perience and common sense.” Id. at 995–96 (internal quotation marks omitted).

Apply ing this standard, we conclude that the business

owners have not alleg ed sufficient facts to support their claim that Yelp authored neg ative u ser reviews of the businesses in question.

Only two business o wners alleg e that Y e lp authored
neg ative reviews of their businesses: Cats and Dog s a nd Mercuri o

. Cats and Dog s’ alleg a tions concern neg ative reviews f rom just two users, Chris R. and Kay K. Cats a nd Dog s a dmits that the Chris R. review corresponds wi t h an actual c lient visit
, as it c omplained to Yelp that the r eview

was p osted m o r e than a y ear a f ter the v isit. I n lig ht o f this acknowledg ment, common sense sug g ests that Yelp was not the author of the Chris R. review. So the alleg ation that Yelp itself authored neg ative revie w s must boil down to the two reviews attributed to Kay K.

The facts alleg ed in the c o m p laint do not plausibly establish that Yelp authored the Kay K. review. Y elp is a forum for consumers to review businesses, and hug e numbers of cons u m e r s do just that. F or Cats and Dog s to make aL E V I T T V

. Y E L P ! I N C

. 24

plausible claim that Yelp authored the Kay K. reviews, it
must plead f

a c t s t e nding to demonstrate that the Kay K

. review was not, as is usual, authored by a user. Cats a nd Dog s pleads no such facts. I n the Second A m e n d ed Complaint, Cats and Dog s sug g ested that the Kay K. reviews

were authored not by Yelp, b ut by the same p e rson w ho authore d t h e C hris R. posts or by a person who h ad vandaliz ed the hospital. And while the Third Amended Complaint a l l e g es g enerally that “ a pprox imately 200 Yelp employ e es or individuals acting on beh a l f o f Yelp have written reviews of business on Yelp,” and that Yelp’s CEO admitted in a New York Times b l o g p o st that Yelp has p aid

users t o w rite reviews, nothing connects these g eneral

a l l e g ations to the specific, neg ative reviews complained o f here.

Mercurio fares no better. He surmises that because he has

no records of doing the work cited in the review, and because the names o f the users do n ot match the n ames of his customers, Yelp authored the neg ative r e v i e w s. B ut even if

a particular review was not accurate a s to the work done o r the customer’s name, the inaccuracy does not make it plausible that it was Yelp — a s opposed to a competitor, or

a disg runtled customer hiding behi n d a n alias, or an a ng ry neig hbor, just to g ive a few possibilities — that a uthored the offendingreview.

Ac cording ly
, we ag ree with the district court that the Third Amended Complaint does not alleg e sufficient facts from which to infer that Yelp authored the neg ative reviews of which Cats and Dog s and Mercurio complain.

F or these r easons and the reasons ex plained in Part I I .B of this opinion, we conclude that none of the b usiness ownersL E V I T T V

. Y E L P ! I N C

. 25

have stated a claim o f “ u nlawful” conduct on the basis o f

ex tortion. W e therefore affirm the dismissal of th e s e p arate claims of civil ex tortion and a t tempted civil ex tortion, a s well. 6

D. The UCL “Unf

a ir” P rong
“Each prong of the UCL is a separate and distinct theory of liability ,” and so “the ‘unfair’ practices pro n g offers [ plaintiffs] an independent basis for relief.” Lozano v. AT & T W ireless Servs., Inc.
, 504 F .3d 718, 731 (9th Cir. 2007). At leas t w i t h respect to business-competitor cases, to state a claim u nder the U CL ’s “unfair” prong the alleg ed unfairness
must “be tethered to some leg islatively decl ared policy o r proof o f some actual or threatened impact o n competition.” Cel-Tech
, 20 Cal. 4th at 186–87.

The business owners acknowledg e that t h e Cel-Tech standard applies h ere. Althoug h this c a s e i s not a suit involving “ unfairness to the defendant’s competitors,” Lozano
, 504 F .3d at 735 (emphasis a d d ed), as Yelp does not compete w ith the business owners, th e c r ux of the business owners’ complaint is that Yelp’s c onduct u nfairly injures their economic interests to t h e benefit of other businesses who choose to advertise with Yelp.

I n busi n e s s-competitor claims, “the word ‘unfair’

. . . means c onduct that threatens an incipient viola t i o n o f an antitrust law, o r violates the policy o r spirit of one of those laws because its effects are comparable to or the same a s a violation of the law, or otherw i s e sig nificantly threatens o r

6 W e do so w ith o u t reach i n g th e q u estio n o f w h eth er Calif

o rn ia co u rts

reco g n ize a d istin ct to rt o f civ il ex t o rtio n

.L E V I T T V

. Y E L P ! I N C

. 26

harms competition.” Cel-Tech
, 20 Cal. 4th a t 187. Under this standard, the business o wners have not stated a claim that Yelp violated the UCL ’s p rohibition of unfa i r business practices.

The b usiness owners do not alleg e that Yelp violated any “leg islatively declared policy ” other than the p r ohibitions on

ex tortion discussed a

bove. F or the reasons discussed, they have not pled facts sufficie n t t o s upport an inference o f

ex tortion.

A s to v iolations of antitrust principles, the busine s s

owners alleg e g enerally that Yelp’s conduct “ha r ms competition by f

avoring b u s i nesses that submit to Yelp’s manipulative conduc t and purchase advertising to the detriment o f competing businesses that dec l i n e to purchase advertising .” This very g e neral alleg ation does not sati s fy Cel-Tech ’ s requirement that the effe c t of Yelp’s conduct
amounts to a violation o f antitrust laws “or ot h erwise sig nificantly

threatens or harms competition.” I d.

F or these reasons, we conclude that the U CL c laim f ails under the “unfair” prong , as well. 7

7 T h e b u sin ess o w

n ers su g g est th at t

h e d istrict co u rt s h o u ld h av e allo w ed th em t o p articip ate in d isco v ery b ef o re g ran tin g t

h e m o tio n t o d ism iss, so th at th e b u sin ess o w

n ers co u ld h av e m arsh aled f ac t s to su

p po rt th eir alleg atio n s

. Becau se th e bu sin ess o w n ers so u g h t d isco v ery relatin g to Yelp ’ s ch allen g e to th eir stan d in g , w h ich Yelp d o es n ot ren ew o n ap p eal,

a n d b ecau se w e af

f irm th e d ism issal b ased o n th e T h ird Am e n d e d Co m p lain t ’ s f ailu re to state a claim
, th e d isco v ery so u g h t co u l d n o t h av e af f ected o u r d ecisio n

.L E V I T T V

. Y E L P ! I N C

. 27

III.

The business owners’ Third Amended Complaint fails to state a claim u nder California’s u nfair competition laws, a nd fails to sufficiently

alleg e ex tortion or attempted ex tortion.

W e e mphasiz e that we are n ot holding that no c ause o f action ex ists that would cover conduct such as that alleg ed, if adequately p led. 8 B ut for all the r easons n oted, ex tortion is an

ex c e eding ly n arrow concept as applied to fundamentally economic behavior. The business owners have not alleg ed a leg al theory or plausible f acts to support the theories they do
arg ue.

The judg ment of the di s t r i ct court is, according ly
, AF F IRMED.

8 A g ain , w e are n o t co n sid erin g w h eth er th e CDA w o u ld p ose a barrier
to an y su ch claim s.