Earlier this week, the New York Post reported that the Union Street Guest House, a hotel in Hudson, New York, had a unique method of controlling negative reviews online. According to the New York Post, the hotel's website stated that “If you have booked the inn for a wedding or other type of event . . . and given us a deposit of any kind . . . there will be a $500 fine that will be deducted from your deposit for every negative review . . . placed on any internet site by anyone in your party.” However, the money would be refunded if the negative review is removed.
Effectively, this policy means that if a wedding guest posted a negative review of the hotel on the internet, then the couple whose wedding took place at the hotel would be fined $500.
Although the hotel's owner stated that the company policy was a joke, a Yelp review from November 12, 2013 (notably several months before the New York Post article) states that the reviewer received an email threatening to enforce the policy.
Businesses are always seeking to protect their reputations, especially online. However, this hotel's policy is not legally sound.
Challenging the hotel's policy
Should the hotel have enforced this policy, it could have been successfully challenged in court as the policy is an unconscionable contract. New York courts have defined an unconscionable contract as being "so grossly unreasonable...in light of the mores and business practices of the time and place as to be unenforcible [sic] according to its general terms" (Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1, 10, 537 N.Y.S.2d 787, 791 ).
In order to determine whether a contract is unconscionable, New York courts utilize the following two-part test:
Essentially this means there must be a showing of an absence of meaningful choice with contract terms that are unreasonably favorable to one party. The substantive element allows a court to analyze whether the contract unreasonably favors the Defendant.
Should the Union Street Guest House's policy be challenged in court, it would fail the above test. Procedurally, it does not appear as if a complaining party would have had any choice to enter into the contract if they wished to hold a wedding at the hotel. Nothing has been reported as to the negotiability of this policy, and placing the policy on the hotel's website creates the impression that it is a standard policy of the hotel.
However, analysis of the substantive element provides much stronger evidence for the policy to be found unconscionable. First and foremost, it is unclear whether any couple holding a wedding at the hotel was made aware of the policy. If the policy truly was a joke as the hotel owner stated, then it likely would not have been found on, or annexed to, any of the other contracts the couple would have signed. Additionally, should the policy have only been located on the website, it can be argued that the hotel was deliberately hiding the policy from couples seeking to hold their weddings at the hotel.
The terms of the policy, as written, are unreasonably favorable to the hotel. The policy has the effect of limiting the speech of third parties to the contract, which is odd, unexpected, and a violation of society's mores and business practices. On public policy grounds, the court would likely find the policy unenforceable because society wants to encourage speech about businesses to empower consumers.
Potential recourse for Union Street Guest House's negative viral publicity
Shortly after the New York Post article was published, news of the hotel's policy went viral on the internet. As a result of this negative viral publicity, internet users quickly took to websites such as Yelp to post one star reviews citing the hotel's policy for negative reviews as the reason.
Although approximately 5 pages of such reviews on Yelp have been removed in the past few hours, there are negative reviews that have been posted subsequent to the hotel's viral publicity that discuss previous stays at the hotel. Should these reviewers be lying in their negative posts, the hotel could potentially have recourse against them. As previously discussed here, businesses can sue reviewers for false, negative reviews on defamation grounds.
If some of the recently posted negative reviews are based on lies, it would be difficult for the hotel to succeed. One of the elements of a defamation claim is proof of damages that resulted from the false statement. Given the fact that the hotel has experienced a great deal of negative publicity in the past few days, it would be extremely difficult to prove that any false reviews caused damage to its business. Nonetheless, the hotel should continue to monitor its reviews, especially as time distances the hotel from its viral notoriety.
It is difficult for businesses to protect their online reputations, but they should employ legally sound measures to do so. Instead of threatening $500 fines, the Union Street Guest House should have engaged its negative reviewers in a positive manner. If the hotel received negative reviews that contained lies, it could have then proceeded with a defamation suit against those reviewers. Hopefully, the Union Street Guest House's policy to limit negative reviews, and the viral notoriety it spawned, serves as a cautionary tale to other business owners.
As the internet has grown, businesses have had to contend with a multitude of websites that allow users to post reviews of their experience with a business. One of the most popular consumer-review websites is Yelp. Its understandable that every business will have a few dissatisfied customers, but what if a dissatisfied customer posts a negative review that is full of lies?
It is difficult enough for a business to deal with negative reviews that are truthful, but there are only two options for dealing with a negative review that is a lie: If the lie is not particularly scathing, the business could respond to the review; or, if the lie if is so harmful to your reputation that you believe it will harm your business, you can sue the reviewer for defamation (or at least threaten to do so.)
In order to prove defamation in this scenario, it must be shown that:
Earlier this year, in Virginia, a jury found that a homeowner defamed her contractor when she posted two reviews stating that the contractor botched her home renovation and stole from her. The sole reason the contractor was not awarded the $750,000 he should have won was because the jury found that the contractor also defamed the homeowner in responding to her negative reviews with accusations. This case opened the eyes of many business owners across the country.
Yelp has correctly stated that "litigation is not a good substitute for customer service," and business should only sue for defamation as a last resort. In this scenario, filing suit should only be reserved for blatant and serious lies.
Further, the idea of being sued for defamation may be enough to encourage the posting-user to take down their false damaging comment. As long as the business could have a conceivable defamation suit against the user, it may be more cost-effective for a business to have an attorney send a letter to the user demanding the removal of the comment, or otherwise be sued for defamation. However, this strategy should not be abused to suppress truthful free speech.
Businesses have a difficult enough time finding ways to manage and appropriately respond to truthful negative reviews online. They should not be subject to harmful lies as well, without recourse.
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