In SA Luxury Expeditions, LLC v. Schleien, 22-CV-3825 (S.D.N.Y. Aug. 29, 2022), the court held that fake Trust Pilot reviews that reduced plaintiff’s overall star rating but were not explicitly negative did not constitute “disparaging” remarks as defined by a prior settlement agreement between the parties.
The parties to the case operated competing tour businesses. Order at 1. SA Luxury Expeditions sued Schleien, alleging that he had posted fake negative reviews of SA Luxury Expeditions on third-party websites. Id. at 1-2. The parties settled that lawsuit, with Schleien agreeing not to make “written or oral comments disparaging SA Luxury, including by posting online negative reviews of SA Luxury.” Id. at 2. Subsequently, SA Luxury sued Schleien again, this time alleging that Schleien had breached the settlement agreement by fabricating additional negative reviews on the third-party review website Trust Pilot. Id. Trust Pilot reviews incorporate both text and a star rating, ranging from one to five stars. The text of the allegedly fake reviews was not “explicitly negative,” but the reviews included four-star ratings that reduced SA Luxury’s average five-star rating from other Trust Pilot reviews. Id.
Holding that SA Luxury had failed to state a cause of action for breach of contract, the court found that the plain language of the settlement agreement reached “only statements that are, in and of themselves, disparaging.” Id. at 5. The allegedly fake reviews harmed SA Luxury by reducing its positive star rating, but they did not portray SA Luxury in a negative light. “If Plaintiff’s claims are true, Schleien either constructed or lucked upon a loophole in the Settlement Agreement. While Schleien’s conduct may be devious, it does not breach the contract.”
This case underscores the rule that, with limited exceptions, courts will enforce contractual provisions that are clear and unambiguous on their face. Here, due to the plain language of a contract’s terms, the court permitted a party to take advantage of the contract’s “loophole” to yield an outcome the counterparty did not anticipate.
If you have a question about contract interpretation, contact Michael Rakower or Travis Mock.SA Luxury Expeditions v. Schleien, 22-CV-3825 (Aug. 29, 2022 SDNY)