Sign Here For Your Room and, As Our Agreement States, If You Rate Us Poorly, You’ll Be Punished

As the nation’s first its kind, on September 9, 2014, California passed AB 2365, a law that now prohibits businesses from including provisions in contracts in which a consumer will waive his or her “right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.”  A business that does so will be fined $2,500 for a first-time violation, $5,000 for any subsequent violation(s), and potentially $10,000 for “willful, intentional, or reckless violations.”

Perhaps other states including New York and Utah will follow.  For example, Union Street Guest House of Hudson, N.Y. had enacted a policy allowing the establishment to deduct $500 from guests’ deposits for each negative review placed online.

Specifically, its website read, in relevant parts:

“If you have booked the Inn for a wedding or other type of event anywhere in the region and given us a deposit of any kind for guests to stay at USGH there will be a $500 fine that will be deducted from your deposit for every negative review of USGH placed on any internet site by anyone in your party and/or attending your wedding or event (emphasis added). If you stay here to attend a wedding anywhere in the area and leave us a negative review on any internet site you agree to a $500 fine for each negative review.”

Union Street subsequently received a flood of negative reviews about this policy and removed it.

California’s new law was inspired by the experience of a Utah couple that posted a negative review about their purchase from KlearGear, a French on-line retailer, but did not pay the $3,500 “Non-disparagement Fee” that was included in the transaction language and demanded by KlearGear.  KlearGear responded by turning over the debt to a collection agency which reported the couple’s failure to pay to credit bureaus, damaging their credit score.  Ultimately, KlearGear was sued in a federal court in Utah and the couple was awarded a default judgment of $306,750 in compensatory and punitive damages plus attorneys’ fees.

Ah, the fine print.

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About Craig McLaughlin

I am an intellectual property attorney and trial lawyer with an office in Southern California. I enjoy representing clients and also enjoy flyfishing, skiing, golf, writing this blog and photography (see blog header). My website is: http://www.smartpropertylaw.com
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