Yelp Inc.'s star rating system does not make the San Francisco company liable for negative reviews posted on its site because it relies on material posted by users, a federal appeals court ruled Monday, dismissing a libel lawsuit filed against Yelp by the owner of a Washington state locksmith company.
The 9th U.S. Circuit Court of Appeals said the star rating system that Yelp features is based on users' input and is not content created by the company, whose site helps guide people to restaurants, plumbers and more. Under federal law, the decision said, Yelp is not liable for content it gets from its users.
The ruling focused on the libel lawsuit filed by Douglas Kimzey. The court said Kimzey's business received a negative review on Yelp in 2011.
Kimzey claimed the negative review about his business was actually about another business, and said Yelp transferred it to his business in an attempt to extort him to pay to advertise with the company.
The appeals court called Kimzey's allegations "threadbare" and said there were no facts supporting that Yelp fabricated content under a third party's identity.
"We fail to see how Yelp's rating system, which is based on rating inputs from third parties and which reduces this information into a single, aggregate metric, is anything other than user-generated data," Circuit Judge M. Margaret McKeown said, writing for a unanimous three-judge panel decision.
The appeals court has ruled previously that under the 1996 Communications Decency Act, websites that provide "neutral tools" to post material online cannot be held liable for libelous material posted by third parties.
It also dismissed Kimzey's claim that Yelp should be held liable for distributing reviews to search engines. The appeals court said distributing the content does not make Yelp the creator or developer of the content.
Kimzey served as his own attorney and said he plans to appeal to a larger court panel.
The appeals court "rightly confirmed Yelp's ability to provide a forum for millions of consumers to share their experiences with local businesses," said Aaron Schur, Yelp's senior director of litigation.
Kimzey said he lost 95% of his business after getting one star on Yelp.
"If you have a one-star rating, people won't go near it," Kimzey said. "They don't care if you've been in business for one week or 25 years."