This story starts in December 2008 when Utah resident John Palmer ordered a couple of small gifts for his wife from the online retailer KlearGear.com. When the items were never delivered, Palmer and his wife, Jennifer, repeatedly attempted to contact the KlearGear and finally reached a customer service representative. According to Jennifer, the CSR would not give her a straight answer about the missing merchandise, so she wrote a scathing review on Ripoff Report, an online consumer rights site.
And that appeared to be the end of the story. The Palmers did not lose any money since PayPal debits an account only after an order is shipped. But fast forward three years and an email appeared in John’s mailbox that ordered him to delete the review from Ripoff Report or pay $3,500 for violating the “non-disparagement clause” of the KlearGear’s terms of service.
The Palmers refused, so KlearGear sent the “debt” to a collection agency, causing a drop in the couple’s credit rating. The Palmers sued, pointing out that the non-disparagement clause was not a part of KlearGear’s TOS when the order was placed. (A little online sleuthing found that the clause was added to KlearGear’s web site in 2012, long after the attempted purchase.)
KlearGear made no response to the lawsuit and a federal court earlier this year issued a default judgment for the Palmers in the amount of $306,750. That, finally, seemed to get KlearGear’s attention.
An email from the company dated May 19, 2014, claimed that KlearGear was “never properly served under the Hague Convention,” and that disparagement clause was included in the terms of service when Palmer made his order. Apparently, it was just somewhere other than where people looked.*
According to Consumerist.com, the non-disparagement clause says: “In an effort to ensure fair and honest public feedback, and to prevent the publishing of libelous content in any form, your acceptance of this sales contract prohibits you from taking any action that negatively impacts KlearGear.com, its reputation, products, services, management or employees.” KlearGear may have a problem with the English language, as it seems to think that “fair and honest” is synonymous with “positive.”
Non-disparagement clauses are generally seen in severance contracts. As a condition of receiving severance pay, a terminated employee often must sign a contract barring her from publically criticizing the company. According to Shepard Davidson, writing for Lexology.com, the clause must be carefully crafted to be enforceable.
But as with KlearGear, non-disparagement language is appearing in an increasing number of consumer contracts. According to MarketWatch.com, wedding photographers, hotels and even dentists have inserted non-disparagement clauses into agreements that customers must sign. The dentist had her new patients sign a contract that not only prohibited them from making any public statements about her, but assigned her the copyright if they did so in violation of the agreement.
Onlineaccessoryoutlet.com went a step further in their terms of sale, which says customers will be charged a minimum of $250 if they even threaten to make a public statement of any kind regarding an order.
Even if such clauses are enforceable, a question that has yet to be definitively answered, is it advisable to put them into your contracts? If you sue an already-angry customer, the outcome is uncertain and attorney fees will probably surpass any award you might get. If your business practices are so bad that you have to attempt to muzzle your customers to keep the word from getting out, you have problems larger than online reviews. And if online reviews are untrue, well that why we have libel laws.
* Finding the terms of service on KlearGear’s site is a losing proposition. I spent the better part of an hour on the site searching for the TOS or a way to contact the company, either by telephone or email, and to paraphrase Winnie the Pooh, the more I looked, the more it wasn’t there.