KlearGear reportedly said that the couple violated a non-disparagement clause in its terms of service by criticizing the company on RipoffReport.com. (That clause apparently was added to the KlearGear's terms of service after the couple tried to place an order.)
When Palmer and Kulas refused to pay KlearGear, the company allegedly wrecked their credit. Palmer and Kulas subsequently sued KlearGear for violating federal fair credit laws. A federal judge awarded the couple $306,750 in July.
KlearGear's attempt at squelching criticism didn't just lead to a courtroom defeat. It also spurred lawmakers in California to pass a new law that protects consumers' right to post reviews.
The bill, signed today by Gov. Jerry Brown, outlaws non-disparagement clauses -- or contractual terms that restrict people's right to post reviews. The measure specifies that anyone who tries to enforce a non-disparagement clause could face penalties of between $2,500 and $10,000.
But the consumer protection law has some gaps, according to Santa Clara University law professor Eric Goldman. He points out that the measure appears to apply only to non-disparagement clauses in contracts, like online terms of service. But some professionals -- most notably those in the health care field -- are trying to control reviews through a different strategy. They're demanding to be assigned the copyright in any future review patients write.
That practice is now being challenged in a 2011 lawsuit against Stacy Makhnevich, a dentist. The case is still pending in federal court in Manhattan, but has been stalled -- reportedly because Makhnevich has stopped communicating with counsel.
Still, despite its limits, the new California law should go a long way toward protecting consumers who want to express their concerns about particular businesses.