Online Review Site Seeks to Weaken Virginia Protections for Small Businesses

ALEXANDRIA, VA  -- After two losses in Virginia’s courts, Yelp, Inc. has asked the Virginia Supreme Court to reverse the landmark decisions of Virginia’s Circuit and Appellate courts and disregard state law, a move that could encourage the defamation of small businesses in the Commonwealth of Virginia.

To defend its reputation against defamatory attacks by non-customers on Yelp, Hadeed Carpet Cleaning sought redress in Virginia’s judicial system.  Yelp was ordered by the Circuit Court for the City of Alexandria to identify a group of anonymous reviewers when Hadeed provided evidence explaining why Hadeed believes they never were customers of his businesses.  After refusing to comply with the court order, Yelp was held in contempt of court by the Circuit Court and fined. Yelp appealed its contempt finding to the Court of Appeals of Virginia.  On January 7, 2014, the Appellate Court affirmed the finding of civil contempt against Yelp.  Yelp remains in contempt of court.

The Appellate Court decision said, “A person’s, or business’s, reputation is a precious commodity.”  Pointing out that “the speech in question constitutes an ‘expression related solely to the economic interests of the speaker and its audience... defamatory speech is not entitled to constitutional protection: ‘Our constitutional guarantees of free speech, as we have seen, protect expressions of opinion from action for defamation. Those constitutional guarantees have never been construed, however, to protect either criminal… or tortious conduct.” Defamation by non-customers is tortious conduct.

Upon learning of Yelp’s appeal to the Supreme Court of Virginia, Joe Hadeed, President & CEO of Hadeed Carpet Cleaning, said, “Virginia has a fair and balanced law that protects small businesses like ours while defending the right of customers to comment anonymously about their personal experiences with the businesses they use.  The Virginia law protects free speech and also protects businesses against defamation.”

Mr. Hadeed continued, “Yelp has tried to suggest that this case is about free speech.  Two courts have said it is not.  Freedom of speech is a foundation of American democracy.  My father and grandfather fought in two foreign wars to preserve our rights as Americans.  But defamatory comments are not protected speech -- and they never have been, on the Internet or anywhere else.”

“Our business has spent almost 60 years building a reputation for high standards and quality customer service — that’s why more than 65% of our business is return and referral customers. We don’t think it’s fair that false and defamatory comments by people who were never customers should be allowed to damage our company’s good name,” he continued.

“And it appears we’re not alone.  Small business owners from around the the country have contacted us to ask how they can help, and to tell us their stories about how frustrated they’ve been with fraudulent reviews on Yelp,” said Mr. Hadeed, “We’re encouraging business owners to contact us and tell us their stories at www.SmallBusinessDefense.org .”

“Perhaps Yelp is doing a public service by alerting the public to problems at small businesses.  Or perhaps Yelp is simply the greatest device ever created for one person to slander another,” said Raighne Delaney, a partner with Bean Kinney & Korman, PC, who represents Hadeed Carpet Cleaning in the matter. “Either way, Virginia law is clear that defamation is not constitutionally protected speech regardless of whether a multi-billion dollar corporation’s business model may benefit from it.”

The essence of Yelp’s appeal to the Virginia Supreme Court appears to be that Virginia’s courts should not apply laws that were enacted by Virginia’s democratically elected representatives. Rather, Yelp would like to establish steep new hurdles that make it nearly impossible for small businesses to protect their reputation against anonymous defamation by non-customers.  In fact,  Yelp is part of a national effort by the American Legislative Council (ALEC) to enact laws in every state and at the federal level that are specifically helpful to its shareholders and harmful to small businesses.

As it is, Yelp already enjoys special federal protections that prevent the company from being sued, even if it knowingly allows defamation on its site in violation of its own rules of conduct. Hadeed’s lawsuit is against the non-customer reviewers who defamed his company, not Yelp. Mr. Hadeed has stated repeatedly that he has no interest is suing real customers.

Hadeed Carpet Cleaning is a family-owned and operated business that was founded in 1955 in Alexandria, Virginia.  The company employs over 100 people and services more than 30,000 residential and commercial customers per year in the Washington, DC Metropolitan Area and the Richmond, VA area. Hadeed Carpet Cleaning is active in numerous local charities and was recently named Business of the Year by the Alexandria, VA Chamber of Commerce.

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John Leary

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Dominion Strategies

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