You may recall the story of John Palmer of Utah, from whom online retailer KlearGear.com demanded $3500 after John’s wife Jen posted an online review discussing the couple's bad experience with KlearGear’s customer service. When John refused to pay the outrageous demand, KlearGear reported the $3500 alleged “debt” to the credit reporting agencies and wrecked John’s credit.
According to KlearGear, John owed the money because when Jen posted her review, John violated a “non-disparagement clause” in the site’s Terms of Sale and Use that prohibited users from taking any action that negatively impacts KlearGear.com or its reputation, on pain of a $3500 fine. But this prohibition didn’t appear in the Terms when John Palmer used KlearGear's website back in 2008 (in fact, the Internet Archive reveals that it didn’t show up until more than three years later!), and even if it had, businesses aren’t allowed to enforce outlandish terms like this one in their fine print.
Three weeks ago, Public Citizen sent KlearGear a demand letter on behalf of the Palmers, asking the company to clear up John’s credit, to compensate the Palmers for their ordeal -- which included a car loan delayed, a credit card denied, and three weeks this fall that the Palmers and their three-year-old son spent without heat in their home because their furnace broke and they couldn’t get a loan to pay for new one -- and to stop using the “non-disparagement clause” on their customers.
KlearGear never responded.
So today, Public Citizen filed suit on behalf of the Palmers, seeking a judicial declaration that the $3500 so-called “debt” is invalid and seeking economic, emotional, consequential, and punitive damages for KlearGear’s abusive practices, which have drawn attention nationally (for instance, ABC and CNN) and even internationally (see this coverage from the UK, Israel, and France).
Today’s case was filed in federal court in Utah. The complaint also names as a defendant debt collector Fidelity Information Corp., for the purpose of the declaratory judgment that John doesn't owe any money (John’s credit report reflects that Fidelity now owns the supposed “debt”). In addition to declaratory relief, the claims against KlearGear include violations of the federal Fair Credit Reporting Act, defamation, intentional interference with economic relations, and intentional infliction of emotional distress. You can read the full complaint here.