Default judgment against KlearGear, the company that billed customers for $3,500, because they posted a negative review

Here’s the order, in Palmer v. KlearGear, Inc. (D. Utah.), apparently just published Thursday:

Whereas Defendant KlearGear.com was properly served according to Federal Rule of Civil Procedure 4 and has failed to appear, plead, or otherwise defend in this action,

Whereas default was entered against KlearGear.com on March 11, 2014, and

Whereas counsel for Plaintiffs has requested judgment against the defaulted Defendant in accordance with Federal Rule of Civil Procedure 55,

It is hereby ORDERED, ADJUDGED, and DECREED that:

(1) John Palmer does not now, and never did, owe KlearGear.com or any other party any money based on KlearGear.com’s non-disparagement clause or any money based on John Palmer’s failure to make any payment allegedly owing under that clause or John Palmer’s dispute that he owed any money under that clause;

(2) KlearGear.com is liable to Plaintiffs for violating the federal Fair Credit Reporting Act, for defamation, for intentional interference with prospective contractual relations, and for intentional infliction of emotional distress;

(3) The amount in which KlearGear.com is liable to Plaintiffs shall be determined by a hearing under Rule 55(b)(2)(B), which shall be held on the 4[th] of June, 2014, at 3:00 pm; and

(4) This is a successful action to enforce any liability under this section, so the costs of the action together with reasonable attorney’s fees as determined by the court, … shall be awarded to Plaintiffs upon Plaintiffs’ motion to be filed within 30 days after this Court sets forth its order determining damages.

You may recall the case, which was quite prominently covered last year; if not, here’s a summary from the Ars Technica item on the decision:

[The Palmers] criticized an online retailer for not delivering a less-than-$20 order in December 2008…. According to Jennifer Palmer, the original order consisted of “a perpetual-motion desk toy and a bendable smiley-face keychain” that were to be Christmas gifts to her from her husband John.

After repeatedly attempting to contact the company by phone and e-mail, the couple reached a customer representative, who claimed that the items had never been paid for and had been cancelled.

By February 2009, Jennifer Palmer posted a review on RipoffReport.com lambasting the company and its poor customer service.

Over three years later, her husband John Palmer received an e-mail demanding that the review be deleted within 72 hours or that he pay $3,500 as he was in violation of the company’s “non-disparagement clause” of its terms of service. However, such a term did not appear in the Terms of Sale and Use that the Palmers had agreed to when they placed their order in 2008.

When the Palmers refused to pay or take down the review, KlearGear sent a collection agency to them for this money, which damaged their credit by August 2012.

KlearGear, ever wise, has reinserted the non-disparagement clause in its Term of Use:

Non-Disparagement Clause

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.

Should you violate this clause, as determined by KlearGear.com in its sole discretion, you will be provided a seventy-two (72) hour opportunity to retract the content in question. If the content remains, in whole or in part, you will immediately be billed $3,500.00 USD for legal fees and court costs until such complete costs are determined in litigation. Should these charges remain unpaid for 30 calendar days from the billing date, your unpaid invoice will be forwarded to our third party collection firm and will be reported to consumer credit reporting agencies until paid.

Perhaps they are looking for still more negative publicity, or eager to pay still more in damages and attorney fees. See also the post on the Public Citizen blog about the case (Public Citizen’s Paul Alan Levy represented the Palmers).

Eugene Volokh teaches free speech law, religious freedom law, church-state relations law, a First Amendment Amicus Brief Clinic, and tort law, at UCLA School of Law, where he has also often taught copyright law, criminal law, and a seminar on firearms regulation policy.
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