An online retailer that threatened to "fine" a couple $3,500 for leaving a negative review online a website has now been ordered to pay $306,750 in compensation and legal fees. John and Jennifer Palmer won the verdict as compensation for KlearGear damaging their credit record with a bogus debt claim.

Back in 2009, Jennifer Palmer left a negative review of the company after it failed to deliver two desk toys ordered by her husband. Three years later, KlearGear demanded that the couple withdraw the review within 72 hours or face a fine of $3,500. The fine is for violating a non-disparagement clause in the company's terms of sale, which says that customers cannot write negative reviews about their products or purchases. (Source: ripoffreport.com)

Online Sales Clause 'Bans' Negative Reviews

There were three problems with that demand. According to the Palmers, KlearGear had already breached the contract with its failure to deliver the goods. Meanwhile, KlearGear said the couple had failed to pay with the original order and the order was cancelled; that arguably meant the contract was void. And in any case, it turned out the non-disparagement clause was irrelevant, as it wasn't added to the terms of sale until long after the 2009 order was placed.

Unsurprisingly, the Palmers refused to take down the review or hand over any money. That led to KlearGear instructing a debt collection agency to try to get the $3,500 "fee" - something the Palmers say hurt their credit rating.

Last month, a federal court agreed to issue a declaratory judgment to say that the Palmers did not owe the $3,500. That ruling doesn't have any immediate practical implications, but would effectively guarantee defeat for KlearGear if it did pursue legal action over the alleged debt.

First Amendment Issue Still Unresolved

At the time, the Palmers also asked for the judge to rule that a non-disparagement clause would be unlawful as it violates the First Amendment. It doesn't appear that issue was addressed in the ruling.

Now the court has agreed that KlearGear must pay a total of $306,750: a combination of compensation for the actual damages caused to the Palmers, punitive (punishment) damages for its behavior, and legal costs. Both court rulings were default judgments, as Klear Gear did not attend and present a case. (Source: consumerist.com)

Klear Gear has yet to comment on the damages award. It's not yet certain that the Palmers will be able to enforce the judgment and collect the money.

What's Your Opinion?

Do you think companies should be allowed to use non-disparagement clauses for online sales? Do you think non-disparagement clauses violate the First Amendment? Have you ever left a negative review of a product online? How much notice do you take of online reviews before making a purchase?