Public Citizen, Nonprofit Consumer Group, Sues KlearGear.com, Firm That Allegedly Fined Utah Couple $3,500 For Posting Negative Review Online

recommendedreading1EDITOR’S NOTE: The case described below is apt to be followed closely by First Amendment advocates and companies trying to avoid PR calamities.

Public Citizen has gone to federal court in Utah, alleging that Michigan-based KlearGear.com effectively fined a Utah couple $3,500 after the wife posted a negative review of KlearGear at RipoffReport.com after her husband never received a desk toy and a keychain he’d ordered as Christmas gifts in 2008.

The items were valued at less than $20, including shipping, and never arrived from KlearGear, according to the complaint.

KlearGear also is accused in the lawsuit of causing a debt collector to go after the couple and of lying to credit-reporting agencies when asserting the debt was valid.

Named defendants were KlearGear of Grandville, Mich., and Fidelity Information Corp. of Los Angeles. The plaintiffs are John Palmer and Jennifer Kulas of Layton, Utah.

“A company may not retaliate against a customer for a critical review by demanding money under a penalty clause in contractual fine print or by wrecking the customer’s credit,” said Scott Michelman, a Public Citizen attorney.

From Public Citizen (italics added):

In December 2008, John attempted to make a purchase on the KlearGear.com site, but the order was never delivered. His wife Jennifer then wrote a critical review on RipoffReport.com. In 2012, the company contacted John and demanded $3,500 pursuant to a non-disparagement clause contained in the website’s terms of use, which purported to prohibit “any action that negatively impacts KlearGear.com [or] its reputation.”

However, the non-disparagement clause did not appear in the terms of sale when John did business with the company; it was added more than three years later. And even if it had been present at the time of John’s transaction, the clause would be unenforceable under basic principles of contract law and the First Amendment, Public Citizen explains in the suit.

Among the issues in the case is whether a retailer such as KlearGear can enforce so-called “non-disparagement clauses” though contract language that asserts its customers owe it money if they complain online. Public Citizen has taken the view that KlearGear’s alleged behavior chills the First Amendment and is “unconscionable” and unenforceable as a matter of law.

Whether other direct-sales companies such as the collapsed FastProfitsDaily scheme would monitor the KlearGear case is unclear. FastProfitsDaily once threatened recruits with a $500 fine if they filed a chargeback. Other MLM-like “programs” also have threatened recruits with fines for trying to leave the “programs.”

Look for this phrase online: “ALL Purchases are FINAL and NO REFUNDS or CHARGEBACKS are allowed. Any attempts to acquire a refund or chargeback constitute theft and fraud, and are grounds for legal prosecution.”

Some of the sites on which this phrase appears threaten $500 chargeback fines. Others threaten $100,000 fines for linking to content or portions thereof.

 

 

About the Author

Leave a Reply