KlearGear vs. the First Amendment

Submitted by Charlton Stanley, Guest Blogger

When the public’s right to know is threatened, and when the rights of free speech and free press are at risk, all of the other liberties we hold dear are endangered.
– Senator Christopher Dodd

Utah Federal CourtBack in 2008, John Palmer ordered gifts for his wife, Jen. John ordered from KlearGear, an online retailer located in Michigan. When the merchandise did not arrive, Jen began calling, but got the runaround from KlearGear and the order was canceled. At that point,the frustrated Jen Palmer wrote an account of her negative experiences with KlearGear on the complaint site, Ripoff Report. In describing her frustration with trying to reach somebody at the company to talk to, Jen wrote, “There is absolutely no way to get in touch with a physical human being. No extensions work.”

In 2012, more than four years later, KlearGear notified the Palmers they were being “fined” $3,500 for their negative review. KlearGear warned that unless the bad review was removed from Ripoff Report, they would turn the “fine” over to a collection agency. Ripoff Report makes it clear on their web site that they do not remove negative reviews, but merchants have the opportunity to respond, with their response posted next to the original complaint.

When the unpaid $3.500 was reported as a bad debt to all the credit reporting agencies, the Palmer’s credit rating took a nose dive. They were unable to buy a furnace they needed, they could not finance a car, and were denied other credit, including buying a new home.

KlearGear claimed Palmer had violated their terms of service, which prohibited bad reviews. This is the language on their website which KlearGear said the Palmers violated, justifying their “fine”:

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.

Here, the matter becomes curiouser and curiouser. The management of KlearGear must have forgotten the Wayback Machine. The Wayback Machine never forgets. When TechDirt researched it, they discovered the clause was not there on December 19, 2008 when John Palmer placed his order. Even more curious, if you check their website now, it is nowhere to be found. The clause has been redacted after local television station KUTV reported it.  KUTV news staff tried to contact KlearGear when they were preparing the story, but didn’t have any more luck than Jen Palmer. Report here, with video.

Things get even weirder here. According to news reports, KlearGear variously reported “A”or “B” ratings by the BBB. Then, the BBB and TRUSTe learned KlearGear is using theirs logos on its Website without permission.  Additionally, BBB says KlearGear has a “Not Rated” rating. BBB also has a red-flagged alert on this business.

For a company so cavalier about using other people’s logos, they are certainly protective of their own:

All content included on this site, such as text, graphics, logos, button icons, images, audio clips, digital downloads, data compilations, and software, is the property of KlearGear.com, or its content suppliers and protected by United States and international copyright laws.  The compilation of all content on this site is the exclusive property of KlearGear.com and protected by U.S. and international copyright laws.  All software used on this site is the property of KlearGear.com or its software suppliers and protected by United States and international copyright laws.

It goes on to say:

Copyright Complaints:
KlearGear.com and its affiliates respect the intellectual property of others.

You can scroll to the bottom of their front page and see for yourself.

The Palmers had enough, so now the Public Citizen Litigation Group represents them. Public Citizen attorney Scott Michelman wrote to KlearGear on November 15, giving them until December 16 to retract their demand for money from the Palmers. Since there was no satisfactory response, on December 19, the Palmers filed a lawsuit against KlearGear in Federal Court for $75,000. They are also seeking attorney’s fees and punitive damages.

Attorney Michelman learned even more about the company when he sent the demand letter on November 15. He said, “There are a number of things we’ve either discovered or read about them that make us concerned about what kind of company it is,. Since we’ve sent the demand letter, they appear to have moved within Grandville, Mich., and both locations appear to be nothing more than a mail drop.”

Obviously, if the defendants fail to show up in Federal Court, the Palmers win by default. My question now is whether the defendants even have any assets to seize.

In researching this article, I read that more companies are putting this kind of egregious restriction on speech in the fine print of their Terms of Service. An ominous development.

42 thoughts on “KlearGear vs. the First Amendment

  1. You have to wonder what kind of service a business offers or intends to offer when a non-disparage clause is placed into the user agreement.

    I wonder if there is a defense to an accusation of disparaging if the information presented is true, as is the case with libel and slander.

  2. Let us be clear about this gear company. If we tell the truth the truth will set us free and the schmucks at kleargear will be eating goat apCray for a long time.

  3. WTF kind of a company is that? And who the phuk would buy anything from a company that had that type of fine print.

    I always wonder about the fine print. They could put on there that by purchasing their products you have sold them your house.

    This KlearGear company needs a lesson in morality and ethical behavior. What happened to kissing the customers a$$ if you made a mistake?

  4. What has happened in this country is that corporations now control everything including what we can say. It wasn’t all that long ago that in order to settle a claim a family had to agree to a life time ban on discussions of the companies bad acts not only by the parents but also the CHILDREN. They do it because they can and judges won’t stop them.

    The government needs to take action both as to corporations and this type of preemptive gag clause but also rein in credit agencies and they need to do it NOW.

  5. dont have government make a new law, just put sunshine on it and quit using those companies. Put them out of business for bad acts like this.

    If government gets involved we will have less freedom of action and whatever they do to the company will amount to a slap on the wrist in any event. Put them out of business, that will get their attention.

  6. I have to question how the ‘fine’ is a legal debt.

    If it is not a legal debt,and I doubt that it is, then the threat to make a negative credit report and damage the customers credit would seem to be some kind of extortion.

    It seems to me that more than money is at stake. The merchant has used the credit reporting process in an attempt to extort money that is not owed. That ought to be a crime.

  7. Never heard of “KlearGear” but that does not matter. This is what Capitalism is all about, if your company is incompetent then business is lost – if business is lost you go out of business. Plain & Simple (supply & demand). What ever happened to the customer is always right? It should be illegal for Corporations, companies, businesses and especially Public Employees to not have a real person to take a call when requested and I am also against Public Employees using PO Boxes to avoid confrontation. They depend on the People and the People must demand their rights.

  8. **Bron 1, December 22, 2013 at 9:41 pm

    WTF kind of a company is that? And who the phuk would buy anything from a company that had that type of fine print.

    I always wonder about the fine print. They could put on there that by purchasing their products you have sold them your house. **


    I love fine print used by others & fancy words used by others.

    All of it is an attempt to defraud for monetary gain.


    Honest mistake, I can let that go. Fraud no way, we’ll need to attend a few pray meetings together & sort it out.

  9. ” I am also against Public Employees using PO Boxes to avoid confrontation. ”

    I am not opposed to the responsible use of a PO box. Not all disagreements benefit from face to face confrontation.

    Some disagreements really do benefit from a bit of distance, and time to think things through. Putting the issues in writing sometimes helps.

    Not everyone is completely reasonable. If I were a business owner the last thing I would want is for any disgruntled person to to be able to walk in and start settling scores any way he might want.

    Having said that, the key is responsible policies that lead to timely transparent and fair resolution of disputes.

    BTW, that standard does not seem to have been met in the case of KearGear.

  10. Randy.
    There are two problems with your solution, which by the way I happen to agree with. First, that process has to be handled through the proper legal channels, and that takes time. Second, it takes willingness for government to regulate, something that is in short supply these days. It is up to the private citizen to do what government ought to be doing. All too many people simply do not have the resources, or are able to attract the interest pf public interest law firms.

    In the instant case I have a couple of predictions. First, they will slow walk production of discovery, and second, they either have hidden their assets or never had any to begin with.

  11. The customer has unrestricted damage control from a credit system that can be used by the mafia to attack and destroy. Business, however, has limited liability and after disappearing these people will undoubtedly open up shop with another systematic exploit based upon fraud, deception and “clearly” a standby credit system it can use with total indiscretion. We never hear anyone name names from the corporate entity, it is all behind the corporate vail . In Rome it was cloak and dagger; In the USA it is business as usual.

  12. Whatever the legality of such contract terms, did KlearGear not break the contract by failure to deliver?

    It seems that in any case, by reference to the Wayback site, that the term was not in their TOS at the time the order was placed – so it’s not part of the contract.

    “The order was cancelled” – but presumably by the customer and not the company.

    How crazy does the law get?
    What if the company no longer exists? What would then make all the credit rating agencies remove the ‘unpaid debt’?

  13. Apologies: “The customer has unrestricted damage control…” is not clear.
    The inference should be that the customer has unrestricted damages (as the article portrays) from a credit system that can be readily abused at will.

  14. John said
    Buying a product automatically binds you to “terms of service”??
    In what universe is that?

    John, it doesn’t happen by purchasing the product. It happens when you agree to the terms and conditions without reading them which almost no one does.

    Luckily the law recognizes the possibility of terms that are too onerous

    A couple of years ago there was a software company whose terms and conditions included the consumer giving all rights to their immortal soul to the company.

    On the other hand there was the case of the man who edited the terms and conditions of a credit card offer so that he had zero %, no limit, no fees/fine, and more. The bank signed it without reading it and he got his card.

  15. SlingTrebuchet
    What if the company no longer exists? What would then make all the credit rating agencies remove the ‘unpaid debt’?

    Easy. The consumer disputes the debt with the credit rating agencies. They ask the company to prove it is a valid debt. If the company no longer exists then they won’t answer the request and the debt will be removed.

  16. SlingTrebuchet,
    According to news reports, the order was cancelled automatically by PayPal when the merchandise was not delivered within thirty days. I was unaware of this until yesterday, but is apparently PayPal policy.

  17. Sale is only complete when shipped and received…..they may have a contact for the offer, consideration…. The acceptance is a little fuzzy since the product was not shipped…. It appears they lacked the capacity to fulfill the contract…. Now the folks have what’s called defamation of credit….. Which has affected there ability to procure other products and services… Plus at an increased rate if they do…. They have damages….. The last thing but most important is collect ability…. As OS pointed out….. Since they are a business….. And Granville is it location…it might be a shell corporation….

  18. This company is dirty, plain and simple and even though it might take time to pull their charter, it would be for the common good to do so.

  19. The internet should have the same laws at print or television. If you have the right to publish your discontent then if it’s not accurate the business should be able to sue you for damages. The website she complained to wanted to charge her $2000 to remove it. In YELP she could have removed it but in “RipoffReport.com” they never remove anything.. The complaint site would not respond to her cry’s to remove the complaint. She picked the worst site to complain on.

  20. Now if you’ve ever done anything bad in your life, the internet will make sure it ruins your life. If you ever had a mugshot taken the world will know

  21. gbk:

    you raise a good point so I guess I have to answer that I apparently am not a 100%er. But I will start reading the on-line agreements more carefully before I purchase a product or service.

    It is an interesting point too. What should a contract have in it and shouldnt a contract be agreed upon by both sides. Does just clicking agree constitute a legally binding contract? How does the company know it was you and not your underage child who entered the credit card number? What if you are blind and ask someone to do it for you? Did the person take the time to read the contract to you?

    I think some companies are going too far in setting up on-line agreements for purchases. Why are they doing that? What did JC Penny and Sears, Roebuck do back in the days of mail order? Did they have a 3-10 page “contract” you had to agree to before being shipped a pair of pants or a shirt? I am guessing they said satisfaction guaranteed or your money back. It was, in essence, a one sided binding transaction on the company to deliver the good they showed in the catalog.

    Shouldnt internet based shops follow the same mindset? What is the difference? The bottom line is that a transaction transpired and money and goods changed hands. The rest is unnecessary legalistics based on 0’s and 1’s.

  22. If a product hasnt been delivered, and no money hasn’t been paid, then where is the exact “ripoff”?

    By posting something on the ripoff website, the company’s reputation is damaged as long as the report is out there. Even if the company tries to improve its service, the ongoing damage is still there.

    To me, it goes both ways but the company went too far by spoiling the credit of the customers.

  23. This company fits the pattern of companies operated by Jesse Willms. See the article in The Atlantic January/February 2014 issue.

  24. Just to clarify: After the story went viral, Public Citizens group reached out to us to offer assistance to us.

    (and this is nitpicking, but my name is spelled ‘John’ :) )

  25. John,
    That’s what I get for trying to write while sleep deprived. Edited and updated. Keep us posted on your progress. This company definitely does not pass the smell test.

  26. “If a product hasnt been delivered, and no money hasn’t been paid, then where is the exact “ripoff”?”

    I don’t think ripoff applies only to situations where the consumer looses their money.

    For example, any time the delivery is time sensitive, consumers may be greatly inconveniences or loose opportunities because of bad company policies.

    If a company sets policies that mislead consumers, or frequently lead to bad outcomes for consumers, I think ‘ripoff’ is a reasonable term.

    If the companies reputation suffers, that is the way it is supposed to work.

    Free market advocates make the argument that we don’t need regulation because the market will respond to bad actors and they will cease to be a problem.

    Market response to bad actors can only occur if consumers have accurate and timely information.

    I do think you have hit on the problem of persistence of information on the internet. I don’t think this is much of a problem for business because the reviews I have seen are time stamped so that consumers can see if the company is responding to criticism.

    For individuals the problem is different. Most people make mistakes or take regrettable actions sometime in their lives. Prior to the internet these actions frequently were quickly forgotten and likely never traveled far in any case.

    Now a thoughtless action that, in the past, would have been quickly forgotten, may follow a person for the foreseeable future damaging personal relations and career aspirations. That does not seem reasonable to me. Do we need some kind of mechanism to age-out the general distribution of personal information?

  27. An addnote to the story. There was a claim somewhere along the line, and reported by news outlets, that Ripoff Report wanted $2,000 to take down the bad report. As best I can tell, that was an outright lie, which appears to have been planted by the KlearGear people. Ripoff Report makes it abundantly clear they don’t remove negative reviews, but give the merchant opportunity to explain.

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