Class Action Lawyers Declare Victory Over Yelp, Still Want Damages

Local business review site Yelp is drawing a ton of headlines today as the company has announced a number of changes to the way it conducts business in the wake of several lawsuits that accused the company of extorting businesses to advertise.

In a press release distributed earlier this morning, class action lawyers Beck & Lee from Miami and The Weston Firm in San Diego declared victory over Yelp, calling the modifications a “first step in the right direction”.

But that doesn’t necessarily mean they won’t be pushing through for damages on behalf of their clients.

First, let’s take a look at the modifications Yelp is making. For one, the startup is removing a feature that allowed businesses that advertised with Yelp to place their favorite review above others. In addition, it is letting users see reviews that have been removed by its (automated) “review filter,” which is designed to help prevent business owners from posting all too positive reviews of their own company or malicious reviews of competitors.

The three lawsuits that were filed earlier this year allege that Yelp put pressure on local businesses to advertise on the site, and to add insult to injury turned against companies that didn’t comply by negatively manipulating their ratings.

The company has done its utmost to deny all accusations vehemently.

In a post on the Yelp blog, CEO Jeremy Stoppelman wrote this morning:

Despite our best efforts to educate consumers and the small business community, myths about Yelp have persisted. We’ve said all along we believe these incorrect notions stem from the combination of the filter and this advertising feature — and we’re practicing what we preach.

In addition to the two changes made to the service, Yelp has established a so-called Small Business Advisory Council whose members will provide the company’s management with “guidance and perspective regarding the concerns of small business owners”.

Apparently, all this wasn’t enough to appease the class action lawyers, who are clearly trying to make a name for themselves in this highly-publicized kerfuffle.

In the press release, the two law firms jointly stated:

“Small businesses have been expressing their outrage at Yelp’s dirty business practices for a long time, and it is unfortunate that it took the filing of a class action to get Yelp to make even. Still, there is much work left to be done through the legal process, including the looming issues of Yelp’s ‘pay to play’ sales tactics, as well as the pursuit of substantial restitution and damages owed to the class members.”

So there you have it: the lawyers are latching onto their prey like vicious dogs.

As for the case (Cats and Dogs Animal Hospital Inc. v. Yelp! Inc.): it was originally filed on February 23, 2010, and is pending in the U.S. District Court for the Central District of California. A scheduling conference has been set for April 26, 2010.

We’ll be following this story as it develops.