Yelp, Zotec Partners Lawsuit
The Zotec partners lawsuit was filed in the Southern District of Texas, and the complaint names Zotec Corporation as well as several defendants. The complaint further names Michael Busch and unnamed co-conspirators, as well as C.G. Wentworth and C.W. Johnson.
In addition to naming Busch and the companies mentioned above, the lawsuit also names the members of the San Francisco Chamber of Commerce, Yelp’s business model, the San Francisco Giants baseball team, and the San Francisco Giants cheerleaders.
A Google search of the defendant’s names brings up Wikipedia. Wikipedia is the free encyclopedia that anyone can edit and use for personal or professional purposes. So, if a company that uses the name Zotec puts up a Wikipedia article about the suit, then you can imagine how many hits the page will get. This is essentially the strategy that the Zotec entities intend to use to get their defaulters (and their lawyers) to go away, which is why they are seeking money damages from the three aforementioned defendants.
According to the complaint, and in keeping with the rest of the case, viz., the fact that Yelp is a popular site where one can book quality eats, the defendants intend to make use of that popularity to get their lawsuit thrown out.
First, the defendants fail to produce any evidence that Yelp does anything other than what it says it does, which is to create user reviews for diners and bussers, and that is essentially what the plaintiffs claim Yelp did – create user reviews for their own benefit. Next, according to the contention, Yelp failed to produce any evidence that it receives any revenue from the advertising programs that it has on its website. Finally, according to the defendants’ counsel, there is nothing in the public domain about the status of any internal documents or operating procedures that Yelp relies upon. Given the above information, and the complete lack of supporting evidence, the plaintiffs request that the case be thrown out, and the defendants hereby admit no wrongdoing in this regard.
The complaint against Yelp is rather dandy, but it just doesn’t make any sense.
For one, neither defendant Yelp nor anyone else is a licensed agent or officer of Zotec Partners LLC, the parent company of Yelp. Therefore, to hold Yelp liable for the acts of any entity associated with Zotec, LLC, would be to hold the parent company of the corporation responsible for everything its subsidiary does. Further, according to the complaint, neither the complaint nor the supporting documents refer to any revenue cycle management, audited financial statements, or any documentation of the success or failure of any venture. Finally, considering the fact that the only purpose of this lawsuit is to obtain money through a non-recourse basis, it is totally irrational for Yelp to deny liability when it is undisputed that it does receive revenue from the advertising programs that it operates.
Let’s briefly revisit the revenue cycle, and how it relates to Yelp and Zotec Partners, LLC. In a nutshell, revenue cycle is a term used to describe the last name, “revenue cycle,” which describes the process by which an entity collects payments (typically from advertisers) and uses those monies to make future commercial decisions, such as building out a business website, increasing employee numbers, and so on. Yelp’s revenue cycle actually describes a fairly comprehensive overview of how it works.
So, to say that Yelp has engaged in any wrongdoing is simply an overstatement. Further, it is simply not within the scope of the complaint, as the complaint relies on alleged breaches of fiduciary duties, misrepresentation of information, and breach of contract. Under the law, this is a straightforward case of fraud. Yelp does not have a financial responsibility towards Dr. Price’s enterprise, or to the insured patient. As a result, it certainly makes no sense for Yelp to be subject to this lawsuit.
It should also be noted that both plaintiffs’ claims herein are governed by the same Generally Accepted Accounting Principles (“GAAP”), which apply to all publicly traded companies.
Yelp readily admits that its business model is different than traditional restaurants. Accordingly, and to comply with GAAP principles, Yelp seeks relief from liability in the form of a trial. The District Court granted the requested relief in an order signed by Judge Algenford.
The defendants filed an answer to the complaint denying the claim for breach of contract, advertising fraud, and fraud per se.
The defendants argue that since the claim was brought upon the basis of plaintiffs’ commercial actions, they are not liable for acts of third parties. Plaintiffs counter that this motion is premised upon the fact that defendants knew that they were not advertising the restaurant at the level necessary to attract a substantial number of customers. As a result, they say that they suffer a constitutional right to seek damages for their inability to attract business. The District Court granted the motion. We will address the merits.