That order paves the way for the couple to ask the judge to order KlearGear to pay damages. Their lawyer, Scott Michelman of the advocacy group Public Citizen, says he intends to do so.
The default finding marks the latest chapter in a saga that began in 2008, when the Utah couple John Palmer and Jennifer Kulas ordered an item that they say never arrived. Kulas then posted a negative review of the company on RipoffReport.com. More than three years later, KlearGear contacted them and demanded that they remove the review. The company threatened them with a $3,500 penalty if they failed to do so.
KlearGear claimed that the review violated a non-disparagement clause in the company's terms of service. That clause -- which is no longer online -- reportedly wasn't part of the terms of service when Kulas wrote the review.
Palmer and Kulas didn't remove the review; they probably couldn't have even if they wanted to, given that it was on RipoffReport.com. Understandably, they also didn't pay KlearGear its retroactively imposed bad-review fee.
It's hard to imagine that KlearGear thought it had a legitimate case against the couple, but the company nonetheless allegedly persisted with its claims and reported Palmer to at least one credit agency. When he and his wife protested, the retailer not only repeated its demand for the money, but also charged the couple an additional $50 “dispute fee.”
Late last year, Public Citizen got involved in the matter. The group sent a letter to KlearGear's representative, demanding that the company pay the couple $75,000 for allegedly filing a false report to credit agencies. When KlearGear didn't respond, Public Citizen filed suit on behalf of Palmer and Kulas.
The couple makes the obvious argument that KlearGear can't enforce a non-disparagement clause that didn't exist when they made the purchase. They also say that KlearGear's attempt to restrict consumers' speech would be invalid even if the company had included the non-disparagement clause in its 2008 terms of service.
Given that KlearGear didn't appear in court, we'll never know what its defense would have been. Then again, assuming the allegations are true, it's hard to imagine any defense would have gone over well in court.