An online retailer that allegedly demanded $3,500 from a Utah couple as punishment for posting a negative online review now faces a lawsuit seeking damages and an end to its use of "non-disparagement" clauses in the fine print of sales agreements.
Public Citizen attorney Scott Michelman, who is representing the couple, filed the lawsuit Wednesday in U.S. District Court in Utah after KlearGear.com representatives ignored a settlement offer.
According to the lawsuit, John Palmer purchased a desk toy and a keychain from KlearGear in December 2008. When the items did not ship within several weeks, he cancelled the order and his wife, Jennifer Kulas, posted a negative review in February 2009 on the website RipOffReport.com.
More than three years later, in May 2012, KlearGear demanded that John Palmer remove the review or be fined $3,500 for violating a non-disparagement clause he allegedly agreed to. With the review site unwilling to remove the content, the company slapped Palmer with the fine, which he did not pay, and then reported the debt to credit agencies.
Palmer has since been denied a credit card and slow-walked for a pre-approved car loan, according to the lawsuit. He is worried about moving or refinancing his current mortgage because of his poor credit rating and in October was denied a loan needed to replace a broken furnace.
Michelman, whose organization wants to end similar uses of non-disparagement clauses, wrote KlearGear a letter Nov. 25 giving the company until Dec. 16 to pay Palmer $75,000 or face a lawsuit. He says he never heard back.
"It's really a mystery why the company hasn't responded; we thought the offer we made was reasonable," Michelman told U.S. News. At trial, he says, the company's "exposure for [this] abusive practice could run a great deal higher."
In addition to believing a court would refuse to uphold a "surprise" clause in an online sale contract, Michelman says Internet archives prove the non-disparagement clause allegedly signed by Palmer wasn't used by the company in 2008.
A number listed on KlearGear's website for its media representative has been disconnected.
The lawsuit filed Wednesday also names KlearGear's contracted debt collector. It seeks to absolve Palmer of the $3,500 debt and force KlearGear to stop using the non-disparagement clause. It seeks from the retailer compensatory and punitive damages, attorney fees and statutory damages under the Fair Credit Reporting Act.
Several reviews posted to RipOffReport.com about KlearGear in 2008 and 2009 complain that items were not delivered. It's unclear if other customers were sent a $3,500 bill.
"It will be interesting to learn in discovery how often KlearGear has tried to take advantage of this provision to bully and harass consumers," Michelman said.
Public Citizen is also pursuing a case against a New York dentist who required customers to sign non-disparagement clauses. The clauses, it says, in some cases violate the First Amendment.
Read the Lawsuit: