You may remember the story of John and Jen Palmer, a Utah couple who gave the electronics site KlearGear a scathing review online after some gifts John bought for Jen never arrived. Two years after that review was written, KlearGear dropped a bombshell on the Palmers--delete the review or get slapped with a $3,500 fine for violating a non-disparagement clause in the sales contract. The Palmers didn't pay, so KlearGear reported the fine for collection, which caused a severe ding on their credit rating. Never mind that this clause wasn't there at the time of the Palmers' purchase, and that even if it was, KlearGear breached the contract by not delivering the items in the first place. I diaried on this back in November.
Well, Public Citizen took the Palmers' case and gave KlearGear an ultimatum--remove the ding on the Palmers' credit and pay the Palmers $75,000 in compensation by December 16 or face a lawsuit. KlearGear didn't budge, so yesterday the Palmers sued KlearGear in a Utah federal court.
In May 2012, the lawsuit says, a KlearGear email informed the Palmers they had 72 hours to remove the RipoffReport.com post or pay KlearGear $3,500, because the couple had violated a "non-disparagement clause" in KlearGear’s terms of use that prohibits customers from criticizing the company. (The lawsuit states that this clause was not present at the time of the purchase, but that it’s irrelevant because the terms are "unconscionable" and violate the First Amendment — and what’s more, that John Palmer was the customer and his wife wrote the review.)
RipoffReport.com does not alter reviews unless they are factually incorrect and the request is initiated by the company being reviewed — not the customer — but a KlearGear representative told the Palmers that was irrelevant: Either pay $3,500 or credit bureaus will be notified of your debt. A few months later, the company followed through.
The couple say their poor credit rating delayed a car loan for a used Toyota and rendered them unable to obtain a loan for a broken furnace in October, when they piled blankets atop their 3-year-old son to keep him warm at night. They also have been deterred from refinancing their home or selling their house and buying a new one, the lawsuit states.
Read the full lawsuit
here. The Palmers are suing for Fair Credit Reporting Act violations, defamation, interference with potential economic relations and intentional infliction of emotional distress. Frankly, I'm surprised they didn't sue for fraud as well. Trying to wring money out of a customer for violating a clause that was proven not to have existed at the time of the purchase? Sounds like fraud to this non-lawyer's mind.
The suit reveals a new wrinkle--KlearGear claims that the Palmers never paid. But that seems hard to believe, since all available evidence suggests KlearGear is a racket.
"There are a number of things we’ve either discovered or read about them that make us concerned about what kind of company it is," Michelman said. "Since we’ve sent the demand letter, they appear to have moved within Grandville, Mich., and both locations appear to be nothing more than a mail drop."
Michelman said that if KlearGear doesn’t show up in court, then the plaintiffs can win by default.
Considering how egregious this case is, KlearGear might as well not show up. The only question in this case is how many zeroes will be in the final judgment awarded to the Palmers. Several commenters mentioned in my first diary that the fines for FCRA violations alone could potentially be whoppers. All the more reason to believe that this company has a death wish. After all, why else would it let this case get this far?