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Dec. 18, 2013

Public Citizen Sues Online Retailer That Damaged Utah Customer’s Credit in Retaliation for Critical Online Review

Customer Refused KlearGear.com’s Demand for $3,500 Over Web Posting

WASHINGTON, D.C. – An online retailer that retaliated against a Utah couple for posting a critical review online should compensate the couple, whose credit the retailer damaged, Public Citizen said in a lawsuit filed today on the couple’s behalf. In addition, the complaint asks the court to declare that the couple does not owe the retailer money for criticizing it online.

In the lawsuit, filed in the U.S. District Court for the District of Utah against online retailer KlearGear.com and debt collector Fidelity Information Corp., Public Citizen details the harms caused by KlearGear.com’s false allegations that John Palmer owed KlearGear.com $3,500 because his wife Jennifer posted a critical review of the retailer online. When John refused to pay, the company reported the $3,500 “debt” to credit agencies.

“A company may not retaliate against a customer for a critical review by demanding money under a penalty clause in contractual fine print or by wrecking the customer’s credit,” said Scott Michelman, the Public Citizen attorney handling the case.

In December 2008, John attempted to make a purchase on the KlearGear.com site, but the order was never delivered. His wife Jennifer then wrote a critical review on RipoffReport.com. In 2012, the company contacted John and demanded $3,500 pursuant to a non-disparagement clause contained in the website’s terms of use, which purported to prohibit “any action that negatively impacts KlearGear.com [or] its reputation.”

However, the non-disparagement clause did not appear in the terms of sale when John did business with the company; it was added more than three years later. And even if it had been present at the time of John’s transaction, the clause would be unenforceable under basic principles of contract law and the First Amendment, Public Citizen explains in the suit.

KlearGear.com reported the phony debt to credit agencies, causing the couple to suffer a series of denials of credit, as recounted in the complaint. The Palmers had a car loan delayed and a credit card denied, and they have been unable to sell their home and purchase a new one. Recently, the family was unable to obtain a loan to purchase a new furnace when their old one broke, leaving them without heat for three weeks.

“KlearGear’s unscrupulous conduct has affected every aspect of our lives, from major financial transactions like financing a new home purchase and a car purchase, to basic needs like heat in our home,” John Palmer said. “For weeks, we bundled our son in blankets every night just to keep him warm in his own bedroom. We are fighting not only to clear my credit record and obtain compensation for our ordeal but also to make sure that no one else has to go through what we did.”

Public Citizen is asking the court to declare that Palmer does not, and never did, owe KlearGear.com a debt under the “non-disparagement clause.” The lawsuit seeks compensation for defamation, intentional interference with economic relations, and intentional infliction of emotional distress for KlearGear.com’s reporting to credit agencies that Palmer owed a debt that he did not owe. Additionally, the complaint charges, KlearGear.com violated the federal Fair Credit Reporting Act by failing to correct the misinformation it sent to the credit reporting agencies.

The lawsuit was filed after KlearGear.com ignored a Nov. 25 demand letter sent by Public Citizen on behalf of the Palmers requesting that KlearGear.com contact the relevant credit agencies immediately and inform them that the debt it had reported concerning John was in error. The letter also asked for compensation of $75,000 and permanent removal of the “non-disparagement clause” from its website’s terms of use.

Today’s complaint seeks punitive damages as well as damages for the economic, emotional and other harms that the Palmers suffered as a result of KlearGear.com’s actions.

Lester A. Perry of the Salt Lake City firm Hoole & King is co-counsel for the Palmers.

 

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