Reported / Citable
Background
California’s so-called Yelp law, Civil Code section 1670.8, makes contract terms invalid when they require consumers to surrender the right to make statements about a seller, its workers, or its products and services. It also prohibits a business from threatening to enforce such a term or otherwise penalizing a consumer for protected speech. The question here was when a consumer may sue for the statute’s monetary penalties.
Four consumers filed a proposed class action against Peet’s Coffee after buying products through its website. They challenged language barring certain uses of Peet’s trademarks that would disparage its brand and content intended to cause Peet’s commercial harm. But they did not allege that Peet’s threatened them, enforced the provisions, penalized them, or that they even knew about the language when they visited the site. The trial court sustained Peet’s demurrer, meaning it found the pleaded facts legally insufficient, and dismissed the statutory claim without leave to amend.
The Court’s Holding
The Second District affirmed. It assumed without deciding that the challenged language violated the law’s ban on contractual waivers, but held that merely including an unlawful provision does not let a consumer recover statutory penalties. Reading the statute as a whole, the court concluded that the private penalty remedy applies when a seller threatens or seeks to enforce the prohibited provision, or otherwise penalizes a consumer for protected speech.
The court distinguished between the statutory rule making non-disparagement terms unlawful and the conduct that triggers a consumer’s penalty claim. The plaintiffs’ reading would have exposed a business to a separate penalty for every California visitor or customer even without enforcement, while actual retaliation might produce far fewer penalties. The statutory text and legislative history did not support that result. Because the plaintiffs conceded they could not allege enforcement, a threat, or retaliation, amendment could not cure the claim.
Key Takeaways
- A prohibited non-disparagement clause is invalid, but its mere presence in online terms does not by itself support a consumer claim for Civil Code section 1670.8 penalties.
- A viable private penalty claim requires alleged conduct such as threatening enforcement, seeking enforcement, or otherwise penalizing a consumer for protected commentary.
- The court did not approve Peet’s language; it assumed the terms were unlawful and decided only the remedy question.
- Businesses should still remove overbroad review and disparagement restrictions because attempted enforcement can trigger penalties and other claims.
- Plaintiffs must plead who was threatened or penalized and how, rather than relying only on the number of people exposed to website terms.
Why It Matters
The decision sharply limits no-injury class actions based solely on website boilerplate. California businesses are less likely to face aggregate Yelp-law penalties calculated from every site visitor when no one was threatened or silenced. But the ruling is not permission to retain unlawful terms: a single demand letter, account action, credit report, or other retaliation could supply the missing enforcement element.
For consumer lawyers, the practical focus should be on concrete communications and consequences. Preserve takedown demands, threatened fees, withheld benefits, account restrictions, and evidence linking those actions to a negative review. For transactional counsel, audit terms of use and content rules so legitimate trademark and moderation protections do not read as bans on truthful criticism.