I do think that some citation directories have been hit by a Panda update. Most business information is copied info. This is why you are seeing less and less directories ranking on local search terms. What separates a good local directory from a bad one? Local, unique content. What is the best way for a directory to get this content? User generated reviews. I think this is why Yelp does well in the search results still. Also, to be fair, local directories weren’t made for spamming links. They were made for providing websites and users with business information and listings. They run moderation in many cases (phone verification or post card verification). So, even on a bad day, you couldn’t group them in the same category as a directory of websites that was strictly for getting a link.
I do think that the local directory business is in a tight spot, though. Google has basically declared themselves the “ultimate directory” and the one directory to rule them all and all are subjected unto them. Unless you can pull a Yelp and get a deal with Apple Maps, or pull a Zagat and get purchased by Google, how can you possibly stay relevant? It is time for local directories to reinvent themselves.