$300,000 damages award against KlearGear, the company that billed customers for $3,500 because they posted a negative review

So reports the customers’ lawyer, Scott Michelman of Public Citizen:

On Wednesday, Judge Dee Benson of U.S. District Court in Utah awarded Public Citizen clients John and Jen Palmer $306,750 ($102,250 in compensatory damages and $204,500 in punitive damages) against the online retailer KlearGear.com. The company had demanded $3,500 from the Palmers for writing a critical online review of the company, then ruined John’s credit when he refused to pay.

As a result of KlearGear.com’s actions, the Palmers lost credit opportunities; suffered anxiety, fear and humiliation; and spent weeks without heat in their home for themselves and their 3-year-old son when their furnace broke and they were unable to obtain a loan to replace it.

Public Citizen sued KlearGear.com on the Palmers’ behalf in December. When KlearGear.com failed to respond, the court granted a default judgment declaring that John did not owe the $3,500 and setting a hearing, held Wednesday, to determine damages. After an hour-long hearing at which both plaintiffs testified, the judge announced the award from the bench.

We are gratified by Judge Benson’s ruling, which appropriately compensates the Palmers for their ordeal and punishes KlearGear.com for its abuse of the credit reporting system in retaliation for the Palmers’ speech. The court sent a strong message that corporate bullying of consumers would not be tolerated. The Palmers are relieved that John’s credit has been restored and they feel vindicated by today’s award.

More information about the case is available here.

Last month, I blogged about the default judgment that forms the basis of this damages award; there, the court concluded,

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 ….

KlearGear has argued that it wasn’t properly served, because it is run out of France, and its “only presence in the United States and Canada has been via a network of third-party contractors,” which were not “statutory agents that are authorized to receive service of process.” KlearGear may therefore challenge the enforcement of the damages award, and we’ll see whether any such challenge will succeed.

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. Before coming to UCLA, he clerked for Justice Sandra Day O'Connor on the U.S. Supreme Court and for Judge Alex Kozinski on the U.S. Court of Appeals for the Ninth Circuit. Volokh is the author of the textbooks The First Amendment and Related Statutes (4th ed. 2011), The Religion Clauses and Related Statutes (2005), and Academic Legal Writing (4th ed. 2010), as well as over 70 law review articles. Volokh is also an Academic Affiliate for the Mayer Brown LLP law firm.
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