Yelp Inc. v. Superior Court of Orange Cnty.

• Citation: 224 Cal.Rptr.3d 887,17 Cal.App.5th 1
• Decision Date: 13 November 2017
• Docket Number: consol. w/G054422,G054358
• Court: California Court of Appeals Court of Appeals
• Parties: YELP INC., Petitioner, v. The SUPERIOR COURT of Orange County, Respondent; Gregory M. Montagna et al., Real Parties in Interest. Gregory M. Montagna et al., Plaintiffs and Respondents, v. Yelp Inc., Objector and Appellant.

17 Cal.App.5th 1

224 Cal.Rptr.3d 887

YELP INC., Petitioner,

v.The SUPERIOR COURT of Orange County, Respondent;

Gregory M. Montagna et al., Real Parties in Interest.

Gregory M. Montagna et al., Plaintiffs and Respondents,

v.Yelp Inc., Objector and Appellant.

G054358

consol. w/G054422

Court of Appeal, Fourth District, Division 3, California.

Filed November 13, 2017

Law Offices of Adrianos Facchetti and Adrianos Facchetti, Pasadena; Aaron Schur and Connie Sardo for Petitioner, Objector, and Appellant.

Krongold Law and Steven L. Krongold, Irvine, for Real Parties in Interest, Plaintiffs and Respondents.

Aaron Mackey and Andrew Crocker for Electronic Frontier Foundation as Amicus Curiae on behalf of Petitioner, Objector, and Appellant.

Catherine R. Gellis for Floor64 as Amicus Curiae on behalf of Petitioner, Objector, and Appellant.

Perkins Coie, James G. Snell, Christian Lee, Palo Alto, and Hayley L. Berlin for Automattic Inc., Dropbox, Inc., Facebook, Inc., Google Inc., Pinterest, Inc., Reddit, Inc., Snap, Inc., and Twitter, Inc., as Amici Curiae on behalf of Petitioner, Objector, and Appellant.

OPINION

O'LEARY, P. J.

Yelp Inc., which operates a website for consumer reviews, has petitioned for a writ of mandate to overturn an order compelling its production of documents that may reveal the identity of an anonymous reviewer on its site. Yelp also appeals from a separate order imposing $4,962.59 in monetary sanctions against it for failing to comply with the subpoena requiring production of the documents. Pursuant to the parties' stipulation, we have consolidated the writ proceeding with the appeal.

Yelp argues the orders must be reversed because: (1) the trial court erroneously concluded Yelp lacked standing to assert the First Amendment rights of its anonymous reviewer as grounds for resisting the subpoena; and (2) the court further erred by concluding plaintiff Gregory M. Montagna, Sr.,¹ made a prima facie showing the content of the review posted on Yelp's site by "Alex M.," the anonymous reviewer, was defamatory.

We agree the trial court erred in ruling Yelp lacked standing to assert the First Amendment rights of its anonymous reviewer, Alex M., but find no error in its determination Montagna made a prima facie showing the challenged review was defamatory. Consistent with the recent opinion ZL Technologies, Inc. v. Does 1-7 (2017) 13 Cal.App.5th 603, 220 Cal.Rptr.3d 569 ( ZL Technologies ), we conclude the latter finding was sufficient to support the trial court's order compelling Yelp to produce the subpoenaed documents in the circumstances of this case. We consequently deny the petition for writ of mandate.

However, given the dynamic nature of this area of law—the primary cases we rely upon were decided after the trial court issued its ruling—we also conclude Yelp's opposition to Montagna's motion to compel was substantially justified. We thus reverse the order imposing sanctions against Yelp.

FACTS

Montagna filed a lawsuit against Sandra Jo Nunis and several Doe defendants alleging a single cause of action for trade libel. According to the first amended complaint, Montagna, an accountant, prepared a tax return for Nunis in 2015. Montagna initially quoted Nunis a "minimum" fee of $200 for the preparation of her return, based on her representation that her income was comprised exclusively of wages reported on a W-2 form, and she would require only a simple return. However, both Nunis' income and the resulting tax return were allegedly more complicated than she had represented. As a consequence, Montagna charged Nunis $400 for preparation of the return, rather than the $200 fee he initially quoted.

Nunis allegedly paid Montagna only $200, and refused to pay him more even after receiving "a collection letter" for the balance. And in November 2015, Nunis allegedly went online to the Yelp website and posted the following review of Montagna, using the alias Alex M.: "Too bad there is no zero star option! I made the mistake of using them and had an absolute nightmare. Bill was way more than their quote; return was so sloppy I had another firm redo it and my return more than doubled. If you dare to complain get ready to be screamed at, verbally harassed and threatened with legal action. I chalked it up as a very expensive lesson, hope this spares someone else the same."

Montagna alleged the following statements made by Nunis in the review were provably false: (1) the return he had prepared for her was accurate and complete; (2) he had not caused her to hire another firm to redo his work; (3) he was not negligent in preparing her return, such that her refund more than doubled; and (4) no one in his office screamed at, harassed, or threatened her.

Montagna allegedly sent a demand to Nunis, asking she retract the Yelp review, or correct the false and libelous statements, and warned her that if she failed to do so, legal action might be taken against her. Nunis, however, allegedly failed and refused to either delete or correct her review and Montagna thereafter filed the lawsuit.

In June 2016, Montagna served Yelp with a deposition subpoena seeking business records. Specifically, Montagna asked for copies of any and all documents that would identify the Yelp user Alex M., to either confirm Montagna's belief that the name was an alias used by Nunis, or discover the true identity of the anonymous reviewer. Yelp objected to the subpoena, arguing it violated the free speech rights of the anonymous Alex M., and it later refused to produce the documents.

After Montagna and Yelp engaged in an unsuccessful effort to resolve the discovery dispute, Montagna filed a motion for an order holding Yelp in contempt of court and compelling its compliance with the deposition subpoena. In October 2016, Yelp filed opposition to Montagna's motion. Both parties sought an award of monetary sanctions against the other.

The trial court treated Montagna's motion as simply a motion to compel compliance with his discovery request. The court granted the motion, finding (1) Yelp lacked standing to enforce the anonymous reviewer's First Amendment rights because it had failed to establish the second and third elements of the test set forth in Matrixx Initiatives, Inc. v. Doe (2006) 138 Cal.App.4th 872, 42 Cal.Rptr.3d 79 ( Matrixx ), and (2) even if Yelp had standing to assert the reviewer's first amendment rights, Montagna had alleged facts sufficient to demonstrate a defamatory statement by the anonymous reviewer, Alex M., and was thus entitled to discovery regarding that reviewer's identity. Consequently, the court ordered Yelp ‘to comply with the subpoena by December 9.

Although the trial court's tentative ruling was to deny Montagna's request for monetary sanctions against Yelp, it was persuaded at the hearing to take that issue under submission. And on December 2, the court issued a second order, imposing $4,962.59 in sanctions against Yelp.

On December 7, two days before the trial court's deadline for compliance with its discovery order, Yelp filed a petition for a writ of mandate in this court, seeking an immediate stay of that order. On December 8, we issued the requested stay and invited Montagna to file an informal response to the petition.

Yelp also filed a separate appeal from the sanction order, and the parties stipulated to consolidate the writ proceeding with that appeal. We subsequently accepted amicus briefs in support of Yelp's position on the standing issue, from (1) Electronic Frontier Foundation, (2) Automatic, Inc., Dropbox, Inc., Facebook, Inc., Google, Inc., Pinterest, Inc., Reddit, Inc., Snap Inc., and Twitter, Inc., and (3) Floor64, Inc., d/b/a The Copia Institute.

DISCUSSION

I. Standing

Yelp first contends the trial court erred in concluding it lacked standing to challenge Montagna's subpoena based on the First Amendment rights of its anonymous reviewer, Alex M. We agree. In reaching its conclusion, the trial court relied on Matrixx , a case involving anonymous postings to an online message board. However, as pointed out in the recent case of Glassdoor, Inc. v. Superior Court (2017) 9 Cal.App.5th 623, 215 Cal.Rptr.3d 395 ( Glassdoor ), Matrixx is distinguishable.

In Matrixx , a pharmaceutical company filed a lawsuit claiming that several anonymous posts to the online message board had defamed it. ( Matrixx, supra , 138 Cal.App.4th at p. 875, 42 Cal.Rptr.3d 79.) The company was able to trace the posts to the offices of a San Francisco hedge fund, and it took the deposition of that fund's manager to identify the anonymous poster. ( Id. at p. 876, 42 Cal.Rptr.3d 79.) The manager, however, refused to answer questions, citing the posters' "First Amendment right to speak anonymously." ( Ibid. ) On appeal, the court held the manager lacked standing to assert the constitutional rights of those third party posters. ( Id. at pp. 877-881, 42 Cal.Rptr.3d 79.)

The Matrixx court relied on Powers v. Ohio (1991) 499 U.S. 400, 111 S.Ct. 1364, 113 L.Ed.2d 411 ( Powers ), for the proposition three criteria must be satisfied to establish an exception to the general rule "that ... litigants must assert their own legal rights rather than rely on the rights or interests of third parties." ( Matrixx, supra , 138 Cal.App.4th at p. 877, 42 Cal.Rptr.3d 79.) The three criteria are: "(1) the litigant suffers a distinct and palpable injury in fact, thus giving him or her a concrete interest in the outcome of the dispute; (2) the litigant has a close relationship to the third party such that the two share a common interest; and (3) there is some hindrance to the third party's ability to protect his or her own interests. [Citations.]" ( Id . at p. 877, 42 Cal.Rptr.3d 79.) The court noted the first consideration—the "distinct and palpable injury" criterion—was not at issue in the case. ( Id. at p. 877, 42 Cal.Rptr.3d 79.) The same is true here, as Montagna obviously does not assert there is no viable " ‘case or controversy’ " pending before the court. ( Ibid. )

In its analysis, however,...