Yelp Hit With Second Extortion Lawsuit, CEO Responds

March 5, 2010— -- One week after a California animal hospital filed a lawsuit against Yelp alleging extortion, another California business filed a similar suit against the popular online review site.

A San Diego law firm Wednesday filed a class action with the U.S. District Court for the Central District of California on behalf of Christine LaPausky, owner of D'Ames Day Spa in San Diego.

The complaint alleges that the San Francisco review site promises to remove or bury negative reviews if businesses agree to a monthly advertising subscription.

"Yelp thus capitalizes on the presumed integrity of the Yelp.com ratings system to extort business owners to purchase advertising," the complaint said. The tech blog The Next Web posted a copy of the entire document on its Web site.

In a blog post Thursday, Yelp CEO Jeremy Stoppelman hit back, calling the extortion claims "meritless."

"The allegations are false and easily refuted," he wrote. "They are borne from a lack of understanding of how Yelp works to provide consumers with useful information about local businesses and protect users from fake, or shill, reviews."

He also said that he wasn't surprised by the second "frivolous" suit. Referring to a recent round of financing in which Yelp raised $25 million, Stoppelman wrote, "These misconceptions are also fueled by lawyers, who may have heard about Yelp's recent financing round and may be seeking a share."

"These copy cat suits get filed in what is known as a race to the courthouse, where lawyers jockey to be named the lead lawyer of the case and take the biggest share of legal fees; being among the first to file a suit increases the chance of being put in charge of the case," he wrote.

He emphasized that the company would fight both suits aggressively.

"I do want to ensure you that we don't take any of these allegations or events lightly. Especially the fact that misunderstandings about Yelp have arisen in the first place," he wrote. "We understand some businesses can find us confusing or a source of anxiety. We are working hard to make our business even clearer."

Last week, law firms in San Diego and Miami filed a similar class action complaint on behalf of Gregory Perrault, a veterinarian who owns and operates Cats & Dogs Animal Hospital in Long Beach, Calif.