Since it was first reported by Utah CBS affiliate KUTV, the story of Jen Palmer’s travails with KlearGear, an online merchant of geeky “desk toys,” has been splashed across some of the most popular technology and Internet law blogs. It’s a terrifying story: Palmer’s husband placed an order for her with KlearGear that never arrived. She got a refund, and after being unable to contact the site’s customer service representative, left a negative review of her experience on Ripoffreport.com.
Three years later, Palmer received an email demanding $3,500 dollars for violating KlearGear’s 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.
It is hard to imagine any legitimate purpose for such a harsh clause, despite KlearGear’s statement that it is intended to “ensure fair and honest public feedback.” The fine alone is outrageous, and the threat to report critics to credit agencies is doubly so. As written, the clause would apply to any criticism that “negatively impacts” KlearGear. It appears to have but one purpose—intimidating critics into silence and quick removal of their criticism regardless of the merits.
However, Palmer couldn’t afford to pay the $3,500 KlearGear claimed it was owed, and she also couldn’t pay the $2,000 fee Ripoffreport.com charges to remove reviews. As a result, the post stayed up, and Palmer says KlearGear reported her to consumer credit agencies, hurting her credit.
But even if the term was included in an agreement between Palmer and KlearGear, the fact remains that a term in a contract of adhesion mandating a $3,500 fine for “any action that negatively impacts” the drafter of the contract, determined at the drafter’s sole discretion, is unconscionable, and no court should enforce it.
EFF has repeatedly called attention to the problems with online terms of service (TOS) and End User License Agreements (EULAs), including terms governing parties’ public statements. These agreements suffer from many of the same problems that KlearGear’s terms did—they’re written by the service providers in opaque language that is rarely subjected to judicial scrutiny. The result is that consumers agree to highly disadvantageous contracts as a routine cost of using almost any online service.
But KlearGear’s non-disparagement clause takes this practice to a different and even more egregious level. Unconscionability in contracts is not invoked often. It must be shown that the contact is both a product of unequal bargaining resulting in hidden terms and that the challenged terms are so one-sided as to “shock the conscience.” There could hardly be a better case for showing an unconscionable term that “shocks the conscience.”
KlearGear should immediately apologize and take whatever steps are necessary to remove the stain on Palmer’s credit and make her whole.