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Court Rules Yelp Did Not Defraud Shareholders

A judge dismissed a lawsuit claiming that Yelp executives sold off $81 million in "artificially inflated stock."

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Another day, another court victory for Yelp. Reuters writes that a judge has dismissed a lawsuit filed against Yelp last summer. The review site was slapped with a federal class action lawsuit that alleged that Yelp executives sold off $81 million in "artificially inflated stock," while deceiving shareholders about the quality of the reviews. The plaintiffs claimed that the reviews appearing on the website were not authentic "firsthand" reviews but fraudulent ones, written by people who "did not have first-hand experience with the business."

U.S. District Judge Jon Tigar ruled that "reasonable investors would know that not all reviews posted on Yelp were 'firsthand.'" He ruled that it was a "common-sense understanding of what it means for a website to host user-generated content." Tigar also found that there was "no basis" to the allegations that executives sold off artificially inflated stock.

Tigar added that the plaintiffs' case against Yelp also did not show that Yelp tried to "extort businesses into buying ads" or asked businesses to pay the company to suppress bad reviews. This is similar to other allegations Yelp has fought that accused the site of manipulating reviews. In January, the Federal Trade Commission shut down their investigation into Yelp's business practices concluding that Yelp did not engage in these practices. These claims were also dismissed by the U.S. Court of Appeals which found that Yelp did not engage in extortion or any wrong doing.