• by Wendy Davis , Staff Writer @wendyndavis, October 28, 2011

Last year, several small business owners put the spotlight on Yelp by suing the company for allegedly trying to "extort" them. The business owners alleged that Yelp offered to hide bad reviews and promote positive ones in exchange for ad buys.

Now, U. S. District Court Judge Edward Chen in the Northern District of California has rejected those lawsuits. In a sweeping ruling issued this week, Chen said the federal Communications Decency Act immunizes Yelp from liability for reviews authored by users. What's more, Chen ruled, Yelp also is immune from liability for decisions about how to display those reviews -- regardless of the company's motives in highlighting particular content.

"Determining what motives are permissible and what are not could prove problematic," Chen wrote, adding that allowing litigation about a company's motives in selecting which reviews to highlight could lead to "death by ten thousand duck-bites" for the law's immunity provision.

Yelp has always denied allegations that it would bury bad reviews for paying advertisers. Nonetheless, in April of 2010 the company agreed to some changes to how it shows reviews. Among others, Yelp said it would stop allowing business owners to pay to have a favorite review highlighted at the top of its page.

After the California lawsuits were filed another company, the Miami-based YS Catering -- which operates the service The Fresh Diet -- sued Yelp for allegedly committing "defamation by implication" by showing bad reviews before the good ones. That company, however, withdrew its case late last month, just days after the matter was transferred to federal court.

Of course, regardless of whether Yelp currently faces litigation, the company still could have credibility problems with users -- and businesses -- if people suspect it's manipulating reviews to the advantage of paying advertisers.