KlearGear Sued For Destroying The Credit Of A Couple Who Wrote A Negative Review

from the disparage-that dept

Fri, Dec 20th 2013 3:07pm — Mike Masnick

We've written a couple times about the online retailer KlearGear and its stupendously ridiculous policy of inserting a "non-disparagement clause" in its terms of service, which claims that if you say something bad about the company online, it can fine you $3,500. This is exactly what KlearGeaer attempted to do to John and Jen Palmer. There were all sorts of problems (even beyond the obvious) with this, which we'll get to in a moment. A few weeks ago, we noted that Public Citizen, now representing the Palmers, had issued a demand letter to KlearGear, demanding that the company clear up the Palmers' credit, which the company had ruined, promise to stop using the non-disparagement clause, and to pay up for the serious difficulties created for the Palmers' by KlearGear's illegal stunt.

Kleargear's response was to ignore the letter.

That was probably a mistake. Public Citizen has now officially sued KlearGear in Utah, and you should read the full lawsuit to get a sense of just how terrible and obnoxious KlearGear has been throughout this process. Among the many, many problems with KlearGear's actions are the following:

The non-disparagement clause didn't even exist when John Palmer placed his order. He ordered in 2008, and it did not appear in KlearGear's terms of service until 2012.
KlearGear never actually delivered the product that Palmer ordered. The negative review on Ripoff Report appeared to be an accurate complaint about KlearGear's customer service.
John Palmer, who made the order, was not the same person who wrote the review. That was Jen Palmer, his wife. Even if the clause had been in there and had been binding, it would only have been on John. While KlearGear claims that John telling Jen about the problems still made him liable, that's just crazy.
Even if the clause had been in there, it's completely unenforceable. You can't bar someone from giving an honest review of your crappy service.
Palmer explained to KlearGear that Ripoff Report does not allow the removal of reviews, so that demand was impossible.
KlearGear not only demanded $3,500 and to have the negative review removed, it also told various credit bureaus that John Palmer owed them $3,500 that he wasn't paying, creating a serious credit problem for the Palmers.
When the Palmers disputed the debt claim with the credit bureaus, KlearGear insisted that the debt was legitimate and added an additional $50, again pointing to their terms of service, which had a "chargeback/dispute policy." Yes, this is adding insult to injury. Not only do they tell credit bureaus of a bogus $3,500 claim based on a bogus unenforceable term in a contract that didn't exist at the time of the failed exchange, but they add to the debt when the Palmers contested it.

I'm going to repeat that last point, because it's what shows how insane all of this really is. KlearGear failed to deliver a product, provided bad customer service, and then three years after all of this, the company added a "non-disparagement clause" to its terms, which neither of the Palmers agreed to. The company used that to demand $3,500 for the accurate review, then reported that bogus "debt" to credit bureaus for an accurate review of the company's own failures, based on an unenforceable term in a contract added years after the events took place. And then... it tried to charge even more when the Palmers fought back against the charge.

As the lawsuit details, the impact on the Palmers' life over a product John ordered which was never delivered, was fairly immense. The unpaid debt on their credit report harmed their credit, made it difficult for them to get a (pre-approved) car loan, likely increased the rate they eventually paid for the loan, meant that American Express refused to grant Palmer a card, and left the couple without heat for three cold weeks, because they were unable to buy a new furnace on credit, after their old one broke. Since then the Palmers have decided not to get a home equity loan to fix up their home, fearing the credit problem, and even though they want to sell their house, they're afraid to even try, given these bogus credit problems.

And KlearGear's response to all of this has basically been to stand by everything it did... and then to disappear when asked to fix it.

We'll see how that plays out in court.

Palmer v Kleargear Complaint (PDF)Palmer v Kleargear Complaint (Text)

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Filed Under: credit, jen palmer, john palmer, non-disparagement
Companies: kleargear

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blaktron (profile), 20 Dec 2013 @ 3:14pm

The corporate veil should not protect the asshole's responsible for this. If administrators began going to prison for doing things like this, it would happen a lot less often and companies would have an incentive to correct problems before they get this far.
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- Anonymous Coward, 20 Dec 2013 @ 3:36pm
  
  Re:
  The whole fiction of a corporate entity just needs to go away all together with people once again being held directly responsible for their actions.
  [ link to this | view in chronology ]
  - robert spano, 21 Dec 2013 @ 10:16am
    
    Re: Re:
    If the corporation is now a person, it makes sense that it should be able to put it in jail. In other words - make it impossible for it to do business for a period of time but still be responsible for its bills and paying its employees or if it gets probation it can only do business within a certain area. Make the laws have some teeth.
    [ link to this | view in chronology ]
  - MrSpkr, 21 Jan 2014 @ 4:30pm
    
    Re: Re:
    Your ignorance of the beneficial impact the incention of corporations had on commerce is simply astounding.
    [ link to this | view in chronology ]
  - Joe, 25 May 2014 @ 4:50am
    
    Re: Re:
    Well, at least the criminal side of the coin. The civil side is only so useful as there's ways beyond mere lawsuits to punish executives.
    [ link to this | view in chronology ]
- Philly Bob, 21 Dec 2013 @ 5:09am
  
  Re:
  You have a better chance of seeing Christ.
  [ link to this | view in chronology ]
  - robert spano, 21 Dec 2013 @ 10:17am
    
    Re: Re:seeing Christ-
    I'll see it when I believe it.
    [ link to this | view in chronology ]
- Shon Gale (profile), 21 Dec 2013 @ 6:10am
  
  Re:
  I agree. They should be criminally held responsible. We need to start locking these guys up for fraud and theft. $3,550.00 is considered Grand Theft in most courts.
  [ link to this | view in chronology ]
- Anonymous Coward, 21 Dec 2013 @ 12:20pm
  
  Re:
  "The corporate veil should not protect the asshole's responsible for this."
  
  Why not? That's what the corporate veil is for.
  [ link to this | view in chronology ]
Anonymous Coward, 20 Dec 2013 @ 3:42pm

and that includes insane laws enacted by Congress that leaves out the part that entertainment industries can report falsely that a site has infringing material on it, when it hasn't and can do that with no penalty at all but, if the reverse happens and someone takes down an article of theirs, it can sue, sue, sue to it's heart's content! i suppose that's the difference when those that want something know personally those who are giving it, so as to get preferential treatment!
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Anonymous Coward, 20 Dec 2013 @ 4:29pm

Restrictive Covenant
The Attorney General should get involved.

Compare to New York v. NETWORK ASSOCIATES, INC.
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- David, 21 Dec 2013 @ 12:20pm
  
  Re: Restrictive Covenant
  If the Attorney General gets involved, Justice leaves. Eric Holder is a felon who lied under oath to congress repeatedly about illegal arms trading of his department. He is also the main person responsible for evolving "plea deals" into systematic blackmail for stripping poor people in particular of their Seventh Amendments rights to jury trial, by encouraging and rewarding prosecutors that go for ridiculous penalties when the defendant does not forfeit his rights.
  
  If he gets his grubby paws on a case, big money wins. Every time. He embodies the essence of corruption pervading the current administration.
  [ link to this | view in chronology ]
  - Anonymous Coward, 21 Dec 2013 @ 2:09pm
    
    Re: Re: Restrictive Covenant
    In New York v. Network Associates, the NY Attorney General filed a lawsuit on behalf of residents, complaining about the censorship clause in a software product, and won.
    
    The company "misleads its consumers by placing written restrictions on their software purchases."
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Anonymous Coward, 20 Dec 2013 @ 4:40pm

This just goes to show how much power a company has. Even if such a case is settled in court and people would get every penny back, cases like this causes severe suffering. 3500 is an insane amount for us mortals and even if a review was written in bad faith, people never deserve punishment like this.

Like the police or government; companies have much power and can easily ruin peoples lives if they so wish. Power like this requires responsibility and misuse of it requires severe punishment to fit the harm caused.
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- MrWilson, 20 Dec 2013 @ 5:50pm
  
  Welcome to the World of Money
  This is the reality in the world of money. If you can't legally stop someone from having rights and freedoms, you can at least make exercising those rights and freedoms costly, specifically monetarily costly. If you make it so that it costs money to exercise your rights and freedoms, only the rich are truly free and have any true rights.
  
  Defending yourself in a criminal trial requires money to hire a good lawyer rather than the hit or miss quality public defender or the sparse hope of a pro bono bleeding heart or a relative who's a lawyer.
  
  Defending yourself in a civil lawsuit, or filing one against someone who has wronged you in a civil matter, can be prohibitively expensive (not just for the cost of a lawyer if you can't find one who will work on contingency), but also in the time off work, cost for travel, etc, that it can involve.
  
  You nominally have the right to be heard by your representatives in Congress, and can call and speak to an intern at their office or send a letter in order to receive a canned response, but the monied lobbyists and billionaires are the ones who can take your representative to lunch or a fundraiser gala or for a date with hookers and blow.
  
  The experience of boarding a plane for a billionaire at a private airport is probably not the same as one for a poor double-mastectomy patient who flies coach on a commercial airliner and has to go through the TSA security screenings. The freedom from illegal search and seizure (i.e. "safety" theater) costs only a few million.
  
  Campaign contributions are considered free (as in libertas) speech, so having more money means you have more free speech.
  
  Etc. Etc...
  [ link to this | view in chronology ]
  - Anonymous Coward, 21 Dec 2013 @ 12:25pm
    
    Re: Welcome to the World of Money
    You can have all of the rights and freedoms you can afford. It's the American way!
    [ link to this | view in chronology ]
  - Pragmatic, 3 Jan 2014 @ 5:48am
    
    Re: Welcome to the World of Money
    Thank you for explaining my problem with Libertarianism so much better than I can.
    [ link to this | view in chronology ]
    - anonymous, 25 May 2014 @ 4:57am
      
      Re: Re: Welcome to the World of Money
      That's not even remotely following the definition of that word. Hint: Corporations aren't people and protectionism isn't exactly a free market and practices like the TSA uses are pretty much the definition of government overreach.
      [ link to this | view in chronology ]
anonymouse, 20 Dec 2013 @ 5:08pm

punishment
As they have declined to answer the complains and refused to correct their error they need to pay, and pay big, this is more than a problem about $3500 this is a problem where a business has used its power to fraudulently destroy the name of a person. And i would not be surprised if this was only one case and that there were many others. I would say that as corporate entities are used in resolving problems like this to prevent any one person being punished, then let the company pay , as they cannot arrest and jail anyone then make the fine so severe that the company will not misbehave again or any company will think twice before doing similar. I would say all profits made over the previous years since the failed purchase should be paid to the couple involved. No maybe 50% of their profits, and if they do not have the funds to pay then they must sell any materials they do have at auction so that these people can get paid their due and more, and the company can then move on, maybe they will actually feel like they are punished when they have to start selling vehicles and properties hey own as a business.
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- Aussie Geoff (profile), 21 Dec 2013 @ 4:49am
  
  Re: punishment
  I don't think the company should be fined at all!
  
  A more fitting result would be for the company to have to pay all costs involved with getting the couple's credit rating fixed with each and every credit rating agency AND to pay compensation to the couple of $7,000 ($3,500 each) per day for every day from the day their crediting rating was destroyed to the day it is "undestroyed" at all agencies - example 2,000 days costs $14 million in compensation, the longer it takes, the more it costs KlearGear. Note the compensation is to the couple, the costs of repairing the ratings is paid to others and is not deductible from the compensation, it is an additional cost on KlearGear.
  
  If KlearGear goes bankrupt ..... so sad.
  [ link to this | view in chronology ]
- Anonymous Coward, 21 Dec 2013 @ 12:35pm
  
  Re: punishment
  "... they cannot arrest and jail anyone..."
  
  Actually, they can, they just won't.
  
  Also, a corporation itself could actually be "jailed" in a way. Just as a person in jail is restrained from going out and engaging in the labor market, a corporation could be prohibited from engaging in any sort of income generating activities for the duration of a "jail" sentence.
  [ link to this | view in chronology ]
Anonymous Coward, 20 Dec 2013 @ 5:10pm

The sad thing is: I doubt anyone at Kleargear is going to jail (like they very much should for these highly illegal actions, falsely reporting an owed debt is a big no-no).
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alternatives(), 20 Dec 2013 @ 6:43pm

lets not forget the other party
What about the credit reporting agency?

Why are they being allowed to skate for reporting the BS as truth?
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- That One Guy (profile), 20 Dec 2013 @ 7:30pm
  
  Re: lets not forget the other party
  As far as the credit agency knew, they were dealing with a legitimate, legal debt. Now if they continued acting as though that $3550 was a legitimate debt, and treated the couple accordingly after a lawsuit like this, then they would certainly be due some blame.
  [ link to this | view in chronology ]
  - Anonymous Coward, 21 Dec 2013 @ 12:40pm
    
    Re: Re: lets not forget the other party
    As I understand it, according to the Fair Credit Reporting Act, all the reporting agency has to do is ask the creditor to confirm the information. If the creditor confirms the information, then it stays in the report. The agency doesn't have to do anything beyond that to verify the accuracy. The system is really rigged in favor of the creditors and agencies.
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Anonymous Coward, 20 Dec 2013 @ 9:00pm

Need Discovery
IF this goes to trial, and I fervently hope so, it would be interesting to determine how many other customers/victims KleerGear has tried to stick with these bogus charges. According to the Michigan BBB, they've had several complaints for the $50 charge, but none I could see for the $3,500 charge.

I'd also like to know where their "lawyer" got his degree. Had to be either Cracker Jacks or Wheaties or, perhaps, that sterling example of legal education, the Thomas M. Cooley Law School. Even a dumb enjanear like me knows a contract can't be modified after the acceptance or signing of it. What are these idiots trying to pull? Also, KG's claim that payment wasn't made is easily proven false via PayPal.
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- David, 21 Dec 2013 @ 12:28pm
  
  Re: Need Discovery
  Even a dumb enjanear like me knows a contract can't be modified after the acceptance or signing of it.
  
  Ah, but the beauty is that the contract is made at the time concludent action occurs, and since KlearGear did not do anything, the contract remained pending until KlearGear decided to do something indicating acceptance.
  
  They basically accepted the contract at the moment when they sued for $3500.
  
  Their lawyer will likely try something like that. Or, if he has a shred of sanity and a shred of business ethics, he will just tell KlearGear that they should pay the hell what it takes to settle since there is no way they are going to talk their way out of that bull.
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Anonymous Coward, 20 Dec 2013 @ 9:25pm

Public Citizen Article
Published on pubcit.typepad.com blog Monday, November 25, 2013:

http://pubcit.typepad.com/clpblog/2013/11/utah-couple-seeks-relief-after-credit-ruined-over-non -disparagement-clause-in-a-websites-fine-print.html

Includes the pdf of their demand letter to KlearGear:

http://www.citizen.org/documents/Palmer-Demand-Letter.pdf

Good reading. Too bad KlearGear didn't do so. Popcorn, anyone?
.
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That One Guy (profile), 20 Dec 2013 @ 9:44pm

Typo?
'and left the company without heat for three cold weeks'

That meant to be 'their house'?
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- Kaemaril (profile), 20 Dec 2013 @ 10:25pm
  
  Re: Typo?
  Or, possibly, 'the couple'?
  [ link to this | view in chronology ]
  - That One Guy (profile), 21 Dec 2013 @ 12:06am
    
    Re: Re: Typo?
    That would make more sense, yes.
    [ link to this | view in chronology ]
  - Mike Masnick (profile), 21 Dec 2013 @ 1:08am
    
    Re: Re: Typo?
    Dah. Couple. Fixed. Thanks.
    [ link to this | view in chronology ]
Loonybean, 21 Dec 2013 @ 2:17am

Have they gone
Has the non-disparagement clause gone from their website, or am I just looking in the wrong place?
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- That One Guy (profile), 21 Dec 2013 @ 2:29am
  
  Re: Have they gone
  They took it down I believe within a month after the backlash hit, likely trying to cover their tracks and make sure no-one could read the exact text and terms that they are using to justify the $3500 fine.
  [ link to this | view in chronology ]
  - Loonybean, 21 Dec 2013 @ 2:56am
    
    Re: Re: Have they gone
    So if the terms have gone, the 'fine' is unenforceable. They're screwed...
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- jen (profile), 22 Dec 2013 @ 5:48pm
  
  Re: Have they gone
  the non-disparagement clause disappeared the day after the original KUTV2 article aired.
  [ link to this | view in chronology ]
smartin (profile), 21 Dec 2013 @ 4:13am

This should not be hard
From the Complaint:
"KlearGear�s underlying claim that John Palmer owed it money was based on
an online review that his wife Jennifer wrote in February 2009 criticizing KlearGear�s customer
service after John placed an order with KlearGear in December 2008 and KlearGear never
delivered it. According to KlearGear, this critical online review constituted a violation of a �nondisparagement clause� in KlearGear�s online Terms of Sale and Use that forbade anyone who did
business with KlearGear from �taking any action that negatively impacts KlearGear.com, its
reputation, products, services, management or employees.�

But KlearGear claimed that the order wasn't paid for and that they cancelled the order. Since they unilaterally cancelled the order, the Palmers never "did business" with KlearGear, and so the Terms don't apply.
I hope the Palmers get everything they're asking for.
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Anonymous Coward, 21 Dec 2013 @ 5:12am

Get some!
KlearGear is garbage.

Let's get it on!
-Mills Lane
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Anonymous Coward, 21 Dec 2013 @ 6:41am

Compare to CA State Library
Notice in the KleerGear Lawsuit:
d. The �non-disparagement clause� is unenforceable under the First Amendment because the appearance of such a term in a contract of adhesion is not a voluntary, knowing and intelligent waiver of a constitutional right, and any attempt to enforce such a term in court would invoke the power of the state so as to constitute state action.

Compare to California State Library's similar attempt to restrict First Amendment Rights, in contradiction to federal copyright law, while also violating state privacy laws in collecting personal information:

Permission to Use...
The vast majority of the images contained in the California State Library collections that were produced or published prior to 1923 are public domain images...
The library can claim only physical ownership of the material...
an explanation of how the materials will be used,
the publisher or sponsor,
the print run and/or production numbers,
a circulation estimate,
whether the material is being used for non-profit purposes.
Materials obtained from the California State Library must be published unaltered and in their entirety unless the alterations are approved in advance and in writing by the library...

Compare to Copyright's frequently asked questions...

Works in the public domain may be used freely without the permission of the former copyright owner.
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TJGeezer (profile), 21 Dec 2013 @ 6:42am

Who owns the company?
Most smaller corporations have one or two primary stockholders, I have read. Wouldn't it be interesting to go after them in court. Might go nowhere under the current U.S. corporate misgovernment political system, but getting their names out in public might at least cause reputation problems at the country club. Nah. In their circles, they'd probably be admired.
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- That Anonymous Coward (profile), 22 Dec 2013 @ 9:39am
  
  Re: Who owns the company?
  That is where the story got VERY interesting.
  There were shells, lettings from alleged principals of the company send to the government disavowing ever having signed anything or being involved with it, a fanciful connection to a much larger more important firm (that seems to be folded), and it goes on from there.
  
  One wonders if they lied on the docs creating the company have they already shredded the veil that should protect them.
  [ link to this | view in chronology ]
  - Joe, 25 May 2014 @ 5:07am
    
    Re: Re: Who owns the company?
    The IRS doesn't like being lied to, either. ;)
    [ link to this | view in chronology ]
Ace, 22 Dec 2013 @ 10:19am

Fraud - pure and simple
Mr. Bermender went to extraordinary lengths to hide his direct involvement ... even to the point of manufacturing fake insiders and denying the very documents he authored.

Surely, and we do mean SURELY, his legal beagle Mr. Stephen L. Gutman�P14480 (active and in good standing Michigan Bar) KNEW and was an ACTIVE partipant in it.

Truly sickening and for certain at least ONE lawyerly head should bloody roll.

http://neer-do-well-hall-of-infamey.blogspot.ca/
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alternatives(), 23 Dec 2013 @ 7:13am

Re: Mr. William Franklin Bermender
Remember to bar grieve early and often. Send in a bar grievance for the original "contract" and then grieve 'em for any bullshit defence filed in the case.
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Reker, 27 Dec 2013 @ 11:01am

Well at least we can take a little comfort knowing that Kleargear has completely ruined their own reputation with this. Maybe they should fine themselves.
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BOYCOTT KLEARGEAR, 7 Jan 2014 @ 4:24pm

KLEARGEAR's consumer practices
Companies like this are scum. I not only hope the Palmer's prevail, and walk away with millions in punitive damages to teach this company a lesson. I hope that a publicity campaign puts them out of business. These inept fools cant manage to ship a $20 order and then they're going to ruin these poor people's lives for STATING THE TRUTH OF EVENTS?

BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR
BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR BOYCOTT KLEARGEAR
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- Joe, 25 May 2014 @ 5:43am
  
  Re: KLEARGEAR's consumer practices
  A boycott might be redundant about now but...
  
  OK, look for new companies forming with similar language. I've used this before to find a company that illegally copied the website of a company I have done business with. It was actually an accident. ;) If you find anyone, they most likely are a shell for the real owners of KlearGear or at the very least a copycat with just as nasty a business plan. Even one person tracking similar terms could be enough of a leak to reveal their next big scam. We pretty much have to adapt such a strategy due to d**chebaggy states like Delaware that allow you to hide behind fake shells that even the IRS has trouble with. In fact, they have made the antimoney-laundering laws pointless. Doubly annoying since banks spy on innocent people with all those SAR's and such. I'm highly tempted to leave Chase because of their recent trend of bad policies but that's a different story...
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