The New “Yelp!” Law

Personal Injury, Online MagazinesAs a California attorney and even as a layperson, I know that the Golden State sets the trend. After all, when it comes to draconian regulations, many other states, or even the feds will soon follow in lockstep. Despite federal laws making it easy to defame people online, California has said: “hold on a minute.”

But a little background is in order here. We all know the influence and prevalence of social media in our modern lives. Every day, people who use the internet a lot, are even more influenced by social media. And the internet is directly  our lifestyles, buying patterns, fashions, and choices, etc.

At the same time, we feel freer than ever on the internet when it comes to expressing ourselves and trash-talking. We can talk about people, companies and things the way we want on the internet. Social networking platforms, blogs, forums, reviewing websites, etc. Most of all, these all remain places where we can easily share our thoughts.

Plus we interact with people. We can tell people that lawyers are scumbags. And they can even make up stuff from a false account and put us attorneys out of practice if they really trash us well.

How Powerful Have Online Reviews Become?

As discussed, while posting our thoughts on various things we have reached a point as consumers. Yes, it is true, we can make a business popular or bankrupt with our reviews. Many online reviews left by consumers on reviewing websites have turned into legal trials.

What consumers said about a particular product or service of a company sounded so offending to reviewed companies they sought legal help. Next, they went ahead and sued the consumers. After all, it seemed the only way for them to get justice.

A Recent Example Of Litigation Due To Online Review

A homeowner in Fairfax County, Virginia, was sued by her contractor, who was supposed to make improvements to her newly purchased home. The consumer had posted a negative review of the contractor’s work.

So the consumer gave only 1 star to express her dissatisfaction with the services she had received. Also, the homeowner, named Jane Perez, claimed that some expensive jewelry items showed up missing after the contractor left the house.

Christopher Dietz, the contractor, filed the case against her. And it was an unnecessary defamation lawsuit for defaming his business. Noteworthy here, he sued for the amount of $750,000.

The case finally went to court. But the court’s decision was split. So here, no party was granted any compensation. However, the contractor had to pay for the litigation costs. Plus, he had to pay several attorneys to fight his case. In addition to that, he lost a lot of money because of the alleged consumer defamation.

According to the contractor, he had lost nearly $500,000 in business. And all of this was because of the consumer’s defamatory review. The consumer, Jane Perez, was lucky in this particular scenario. Noteworthy here, an attorney represented her on a pro bono basis.

Companies Trying To Fight Back

After many scenarios that emerged similar to the one mentioned above, companies thought of an ingenious method of fighting back. Many online companies and contractors that provide certain services and products started to throw in a non-disparagement clause in their policies and customer contracts.

This particular clause prohibited consumers from defaming the companies in their online reviews and through other methods. In short, this clause prevented consumers from expressing their feelings about a particular service or product. A case happened where a couple violated such a clause.

A famous online retail store troubled a couple because they had posted an online review that was defaming for the business. The retailer had the non-disparagement clause added to its policies. And after the couple had posted the negative online review, the retailer demanded $3,500 from the couple.

The retailer went so far as to report the non-payment of this money as debt. And he caused a big dent on the credit score of the consumers.But this caused trouble for the couple. So they sued the retailer and won. And they received compensation of $300,000 for the damages.

The First Amendment Rights

The first amendment in the constitution of the United States prohibits the making of any law that bars the people of the US from having the right of free speech. In simple words, the public is free to speak its mind. And creating a law or condition that represses the people from having the freedom of speech is not allowed.

Actions Taken By The State Of California

Based on the above events, and learning of the frequency of such cases, California passed a new consumer protection law. Noteworthy here, this law protects your existing First Amendment Rights from shady merchants and companies.

And this is because rights were being trampled upon by online businesses. These unsavory people did this by adding a non-disparagement clause into their online policies and contracts.

According to this law, companies cannot force their consumers to sign any contracts that deprive consumers of their first amendment rights. And this law was signed by the governor. And it’s already in effect as of January 01, 2015. Currently, the law is Yelp! Law.

Merchants, service providers, contractors, retailers, etc. who’d violate this law will have to pay $2500 for the first violation. For the next violations, they have to pay $5000. The fines can be as big as $10,000 if the violation is deemed deliberate or reckless.

What To Learn From This?

Mostly, online retail stores and other businesses must make sure to stay in compliance with the latest changes in the laws. So that way, they don’t have policies in conflict with existing law.

As for consumers, two important things present themselves from which to learn.

  • Make sure you review in detail your homeowners’ policy. Also, look at any other type of insurance. Many insurance providers cover insured people for cases where a company sues the consumer for libel and defamation.
  • Make sure you write your reviews honestly. Don’t add in details or occurrences that haven’t happened. Honestly, this could get you in trouble if the company sues you for defamation.

With the right insurance policy, you can rest assured you can face such a situation. So now perhaps you won’t have to pay the legal fees from your pocket. When it comes to business owners, they should stay updated with the latest laws. After all, they say, “care is better than cure.”

We're here for you, and we look forward to seeing you at the next Podcast!

Based in Marina del Rey, CA, Circle of Legal Trust in an international organization of referral and referring attorneys.

Contact C.O.L.T.

Get in Touch

4640 Admiralty Way #500
Marina del Rey, CA
90292 US

Opening Hours

  • Tue - Sat

    9 am - 5:00 pm

  • Sun/Mon


  • Lunch

    11.30 am - 12 pm

Call for Reservations

+(888) 494-5015

Bookings from 12:30pm - 1.30pm