Reported / Citable
Background
Consumers brought a proposed class action against Ulta Beauty under Civil Code section 1670.8, commonly called California’s Yelp Law. That statute bars consumer contracts from waiving a customer’s right to make statements about a seller, its personnel, or its goods and services, and prohibits businesses from threatening to enforce such clauses or otherwise penalizing protected speech.
The consumers challenged two provisions in Ulta’s online terms. A trademark paragraph prohibited use of Ulta’s graphics, logos, page headers, button icons, scripts, service names, and trade dress in ways that caused confusion or disparaged the company. A termination paragraph reserved discretion to suspend website access for conduct violating the agreement or harming Ulta’s interests. The trial court sustained Ulta’s demurrer—testing whether the pleaded facts stated a legal claim—without leave to amend.
The Court’s Holding
The Second District affirmed. Read as a whole, the trademark provision regulated use of identified marks and website design elements; it did not require consumers to waive the right to criticize Ulta or its products. Separate portions of the terms expressly addressed reviews and comments. The court declined to extract the words “disparages or discredits” from their trademark context and transform them into a general nondisparagement clause.
The termination provision also did not itself waive customer speech rights. Reserving a power to block website access for harmful conduct might conceivably be used in a particular case to penalize protected speech, but the plaintiffs did not allege that Ulta blocked them or threatened retaliation. A contract’s potential to facilitate a future violation of the statute’s anti-penalty provision does not establish that the contract contains a prohibited speech waiver. The complaint therefore failed at the pleading stage.
Key Takeaways
- California’s Yelp Law targets contractual waivers of consumer commentary, not every provision containing words such as “disparage” or “harmful.”
- Courts interpret online terms in context; language limited to trademarks and trade dress will not ordinarily become a general ban on criticism.
- A reserved right to suspend website access is not, standing alone, a waiver of speech rights, although retaliatory use of that power could present a different claim.
- Consumer plaintiffs should plead an actual prohibited clause, enforcement threat, or penalty rather than relying on a hypothetical misuse of otherwise lawful terms.
Why It Matters
Businesses can protect trademarks and manage access to their websites without necessarily violating section 1670.8, but drafting context matters. Terms should clearly distinguish trademark restrictions, acceptable-use rules, and moderation policies from customer review rights. Broad language that expressly suppresses criticism, or retaliation against a critical reviewer, remains risky.
For class-action and consumer counsel, the decision narrows attempts to treat conventional trademark or termination language as an unlawful nondisparagement clause. The stronger case will connect the challenged text or the company’s conduct directly to protected consumer commentary. The opinion leaves open whether a specific suspension or enforcement threat could violate the statute even when the underlying access clause is lawful.