Within Days of Indianapolis Council Vote on $18.5 Million Subsidy, Angie's List Is Hit With New Lawsuit Alleging Consumer Fraud

Within days of the Indianapolis City-County Council voting to give Angie's List a second round of financial subsidies, this one worth $18.5 million, the Indianapolis company finds itself hit with yet another federal lawsuit, this time one alleging consumer fraud.

On March 11, 2015, a woman filed a class action federal lawsuit in the Eastern District  of Pennsylvania seeking monetary damages and injunctive relief from Angie's List based on the allegation that the company uses the "fraudulent, deceptive, and misleading practice of luring consumers to pay for access to purportedly unfiltered reviews, ratings, and search result rankings by consumers of local service providers."  To the contrary, the complaint says Angie's List "secretly manipulates reviews, ratings and serach results for the company's own economic gain."

The lawsuit's allegations continue:

3.  According to Angie’s List, a service provider’s position in a member’s search results "is determined by their recent grades and number of reviews. Companies with the best

ratings from members will appear first." 

4.  Angie’s List falsely assures consumers that "service providers cannot influence their ratings on Angie’s List,"2 "[b]usinesses don’t pay,"3 and "[c]ompanies can’t pay to be on Angie’s List."4 Instead, Angie’s List continuously emphasizes its unique "consumer-first philosophy," which manifests in the company’s "unwavering commitment to placing the interests of the consumer first[.]"5 By "always placing the interests of the consumer first," Angie’s List "help[s] [its] members find the best provider for their local service needs."   

5.  These and similar statements dupe potential and existing members into believing that Angie’s List reviews, ratings, and search results are valuable and trustworthy because they reflect unfiltered feedback of consumers, for consumers. Angie’s List’s standardized form membership agreement (the "Membership Agreement," Ex. A hereto) even declares that the company "simply acts a passive conduit" for reviews and ratings "based upon actual first-hand experiences other users have had[,]" and that Angie’s List "does not endorse" any service providers. But this is not the case.  

 6.   Angie’s List wrongfully conceals from consumers that service providers can and do pay to influence "the List" in at least three significant ways, in exchange for paying substantial "advertising" fees:

The complaint goes on to allege that 1) the company alters the search results so that companies that pay more can appear higher in the rankings; 2) suppress negative reviews for companies that pay Angie's List; and 3) threaten to suppress positive reviews for those companies that don't pay.

The lawsuit claims Angie's List "deceives, defrauds, and misleads its existing and potential member base" and that Angie's List does not help consumers find the 'best' service provider, but rather the one who paid the most money to Angie's List."  The lawsuit alleges that this was Plaintiff's experience with the company:

47.  In the Fall of 2014, Plaintiff hired a contractor she identified through the Angie’s List service to remodel her kitchen. At the time of her search, there were no visible reviews about the contractor on www.angieslist.com. Unfortunately, the contractor did not finish the agreed-upon work and refused to return the $4,000 Plaintiff had paid to him.

48. Shortly thereafter, Plaintiff submitted a negative review of the contractor to Angie’s List. After doing so, Plaintiff was able to see, for the first time, a number of other negative reviews of the contractor written earlier by other members prior to Plaintiff’s hiring the same contractor. That is, up until Plaintiff submitted her own negative review, she was never aware that other members had written negative reviews about the same contractor. One newly-revealed negative review complained about the same exact issue that Plaintiff experienced with the contractor. Plaintiff would not have hired the contractor had she seen these negative reviews earlier.

49.  When Plaintiff confronted Angie’s List about this, an Angie’s List representative did not characterize the suppression of negative reviews as an oversight or a technological error. In fact, upon information and belief, it was because the service provider paid money to Angie’s List.  

50.  Had Plaintiff seen the previously written negative reviews, she would not have hired the contractor. After all, Plaintiff was paying for access to other consumers’ reviews. At a minimum, Plaintiff had a reasonable expectation she would have access to all reviews for a given service provider.  

51.  Meanwhile, Plaintiff discussed her ordeal with a different contractor, an electrician, whom she knew. The electrician told Plaintiff that he pays "to be at the top" of search results on www.angieslist.com. Until this conversation, Plaintiff did not know, and had no reasonable way of knowing, that – contrary to Angie’s List’s advertising and other representations – service providers can and do pay to manipulate search results on www.angieslist.com.

The lawsuit's legal theories are breach of contract, fraud and fraudulent inducement, unjust enrichment and a violation of Pennsylvania's unfair trade practices and consumer protection law.  The lawsuit ask that all paying members of Angie's List in the United States and Pennsylvania be certified as class action plaintiffs and that they be refunded their dues, awarded actual and punitive damages as well as attorney's fees.  Perhaps more importantly going forward, the Plaintiff asks that Angie's List be enjoined from its current business practices outlined in the complaint.
 

The Angie's List $18.5 million subsidy will be voted on by the Indianapolis City-County Council at its Monday, April 30th meeting.  Councilors might ask the company about this promise contained in the Financing Agreement between Angie's List and the City of Indianapolis:

There are no actions, suits or proceedings pending, or, to the knowledge of the Company, threatened, before any court, administrative agency or arbitrator which, individually or in the aggregate, might result in any material adverse change in the financial condition of the Company or might impair the ability of the Company to perform its obligations under this Financing Agreement.

This section was included despite the fact that there are other consumer and shareholder lawsuits pending against Angie's List.