Back in 2008, Jon Palmer bought some gifts on the electronics site KlearGear for his wife, Jen. However, they never arrived, and the order was canceled. After getting the run-around from KlearGear, Jen did what most of us would do--she gave the company a bad review online. A few years later, the Palmers got a rude surprise--a demand that unless the review was taken down, they'd have to pay a $3,500 fine.
After repeated calls to KlearGear.com to find out what happened, Jen Palmer posted a review of the company on ripoffreport.com saying in part ,"There is absolutely no way to get in touch with a physical human being. No extensions work."
More than three years later, the Palmers received an e-mail appearing to be from KlearGear.com stating that they would be fined $3,500 if the negative review posted on ripoffreport.com wasn't taken down in 72 hours.
The email cited an obscure, non-disparagement clause in the terms of use contract that states, "Your acceptance of this sales contract prohibits you from taking any action that negatively prohibits KlearGear.com." A clause the Palmers say was added to the agreement after they made their purchase.
THis story aired yesterday morning on CNN's New Day. Watch the full piece
here.
When the Palmers were unable to remove the review, KlearGear reported the fine for collection, which dinged their credit rating. Now they're suing. Public Citizen has taken their case, and has told KlearGear to remove the ding and pay the Palmers $75,000 by December 16, or else the Palmers will sue KlearGear for violations of the Fair Credit Reporting Act and defamation. Read Public Citizen's letter here.
Something that may help their case--apparently the non-disparagement clause really wasn't there when they placed their order. When Matt Gephardt, the consumer affairs reporter for KUTV in Salt Lake City, first heard about what happened, he discovered that the Website's archives from 2008 contained no reference to a disparagement clause. TechDirt subsequently confirmed that the clause wasn't there at the time of the Palmers' purchase. Which means that the Palmers ended up going without a furnace for a good part of October and had to pull teeth to get a car loan because of what bears the distinct odor of fraud. Moreover, the company received an F from the Better Business Bureau back in 2010 for not delivering products on time. It has a B rating now--but that rating is likely to go way down when all is said and done. CNN tried to get in touch with KlearGear for its side of the story, but none of the numbers it tried worked.
Legal experts say that a large number of companies are starting to add non-disparagement clauses to their sales contracts. However, when CNN legal analyst Paul Callan took one look at the contract, he concluded that there's no way it would stand up in court. According to Callan, such clauses are only valid if the contract is "a fair contract"--and this isn't a fair contract.
It turns out that a lawsuit from the Palmers may be the least of KlearGear's worries. Gephardt reports in a follow-up that the BBB and TRUSTe learned KlearGear is using theirs logos on its Website without permission. The TRUSTe logo is still there as I type this.
The way it looks, KlearGear is better off cutting its losses and paying what likely amounts to a rounding error in its earnings. Otherwise, on the face of it the Palmers could potentially bring this company down. And it'll be well deserved.
5:04 PM PT: Several commenters have pointed out another reason KlearGear has no case--they breached the contract by not delivering the product on time and giving the Palmers the run-around. So KlearGear is essentially trying to shift the costs of their snafu to the Palmers. Yeah, that's a sustainable business model.
5:16 PM PT: Gephardt's follow-up notes that KlearGear has essentially dived--its Facebook page has been disabled, and its Twitter feed is now private. On a good note, though, that disparagement clause is apparently gone. Apparently someone must have told them that it would never stand up in court.