The Fifteenth Court of Appeals in Austin, Texas, has ruled that Yelp, Inc., the online review platform, must defend itself against a lawsuit brought by the State of Texas in a Texas court. The court found that Yelp’s actions, specifically the posting of a disclaimer on the business pages of Crisis Pregnancy Centers in Texas, were enough to establish “specific jurisdiction” in the state. This means the court believes Yelp purposefully targeted Texas consumers and should be held accountable in Texas.
The Dispute’s Origins
The State of Texas sued Yelp, alleging violations of the Deceptive Trade Practices Act. The core of the state’s complaint revolves around a consumer notice that Yelp posted on the business pages of Crisis Pregnancy Centers across the country, including those in Texas. The notice stated, “This is a Crisis Pregnancy Center. Crisis Pregnancy Centers typically provide limited medical services and may not have licensed medical professionals onsite.” The state argued that this notice was misleading to Texas consumers.
Yelp’s Challenge to Jurisdiction
Yelp, a Delaware corporation with its principal place of business in California, filed a “special appearance” in the Texas court. This is a legal maneuver used to challenge a court’s authority over a defendant. Yelp argued the Texas court lacked “personal jurisdiction” – the power to hear the case against them – because Yelp lacked a significant presence in Texas and the lawsuit did not arise from Yelp’s actions within the state. They also argued that exercising jurisdiction would violate the principles of fairness and justice.
The Court’s Analysis: General vs. Specific Jurisdiction
The appeals court’s decision hinged on whether Texas courts had jurisdiction over Yelp. The court examined two types of personal jurisdiction: general and specific.
* General Jurisdiction: This exists when a company’s connections to a state are so extensive and continuous that it is essentially “at home” there. In this case, the court found the State of Texas did not provide enough information in its initial filings to establish general jurisdiction over Yelp. The State tried to argue that Yelp consented to general jurisdiction by registering to do business in Texas. However, the court found the state did not mention the relevant law in the initial filing, and therefore could not use it to establish general jurisdiction.
* Specific Jurisdiction: This applies when a lawsuit arises from a defendant’s specific activities within the state. The court found that the State of Texas *did* successfully demonstrate specific jurisdiction.
Key Factors in the Court’s Decision
The court’s decision to find specific jurisdiction was based on several key factors:
* Purposeful Availment: The court determined that Yelp “purposefully availed” itself of the privilege of conducting business in Texas. This means Yelp intentionally took actions to reach Texas consumers.
* Targeted Advertising: The court emphasized that Yelp derives revenue from location-specific advertising. The State provided evidence that Yelp directs tailored advertisements to Texas users. The court found that Yelp actively solicited business in Texas.
* Relatedness: The court found a clear connection between Yelp’s actions and the state’s claims. The State’s Deceptive Trade Practices claim directly concerns misleading statements appended to the business pages of over 200 Texas Crisis Pregnancy Centers.
Yelp’s Arguments Rejected
The court addressed and rejected two main arguments from Yelp:
* Forum Selection Clause: Yelp pointed to a user agreement with a forum selection clause, stating that disputes should be resolved in California. The court acknowledged the clause but stated it does not prevent the exercise of personal jurisdiction in Texas.
* Lack of Profit: Yelp argued they did not make money from the specific consumer notice. The court responded that the State’s claim is based on the Deceptive Trade Practices Act, which does not require proof of financial loss. Additionally, the court noted that Yelp *might* make money from data harvesting on user searches for Crisis Pregnancy Centers.
Conclusion and Next Steps
The appeals court reversed the trial court’s decision, concluding that Yelp is subject to specific jurisdiction in Texas. The case is now remanded back to the trial court for further proceedings on the merits of the State’s claims. This means Yelp will have to continue defending itself against the State of Texas’s lawsuit in a Texas court.