Non-disparagement clauses can endanger consumers with sudden litigation for speaking out online, and there’s more

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So, what to make of the problem of contractors and other small businesses suing customers for bad reviews, mostly on Angie’s List and particularly Yelp!

Apartment complexes have, at least sporadically, joined the fray, too, with non-disparagement clauses on leases.  In one particularly outrageous case in Utah (details, with supporting links ), an apartment complex tried to force residents to give it Facebook “likes”, but later rescinded (and in doing so, it would be violating Facebook’s own TOS). I wonder of condo boards will, too.

The issue is more complicated than libel, where truth (in the U.S., but not always in Britain or Europe) is an absolute defense.  Here, merely speaking about the issue is a breach of contract.  So far, lawyers are all over the map on whether the clauses are enforceable, but in states without SLAPP laws (mostly “red” states), or maybe in fact in all states except California, they could be.

There are some interesting videos on the problem.  NBC has a basic story about what is called “bullying” by businesses.

A technology guy who says he “talks for a living” (“chatterboxes”) explains that non-disparagement clauses can be a sign of a company hiding bad service or that is combative and litigious. He indirectly hints that review site operators are protected by Section 230, but consumers are not; he also notes some risks with quick social media posts.

Health care and nursing homes can present their own unusual issues, as here.

Businesses do have a point.  In a real world, even one particularly pernicious review could make a lot of future customers hesitant.  It is a serious problem for small contractor business owners (often families) that have to make a living doing real jobs (involving handiness and sometimes some risk, as Sebastian Junger has written about), facing a permissive culture of self-broadcast that doesn’t offer a lot of accountability.  (I should temper this comment by noting that many “family” businesses set up franchise trademarks and still become rather medium-sized, often with several offices in a large metro area, or in several cities.)  But the practical threat for a speaker is the expense defending a lawsuit, even if the legal and ethical grounds for litigation by the contractor seem dubious and even if the customer’s statement is factually true.  Consumer groups say that consumers need other “weapons” besides having the expense of starting litigation themselves.  Countering this idea is the fact that many attorneys for consumers will take cases on contingency. I had this experience myself with liability claim for a convenience store injury in Minneapolis back in 1998.  (I recovered completely.)  But with some contracting situations, a consumer is unlikely to win in court even with litigation if the contractor performed the job to even a minimum standard.

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I don’t write on “review sites” (other than some reviews of books and movies on Amazon or imdb) because I don’t want to complicate my own self-publishing “environment”.  I do have a couple of other little disputes but I have not gone to review sites or even mentioned the parties by name online anywhere.  Yet I get emails from Angie’s List asking if I have anything to review (I am a “member”), and I get ads from approved sellers.  I don’t quite understand this mechanism, because you can’t “pay” for reviews on these sites (legally, at least).

There is more risk to consumers, it seems, from review site postings than from other social media postings or blogs.  I’ve actually been concerned, in the past, that the practice of “gratuitous” speech online could drive away other parties from working with someone.  For example, an employer who finds that an applicant has blogged about a previous employer, even from the distant past, could fear hiring the employer because the applicant will eventually write about the new employer, too, at least critically.  I’ve wondered if property and auto insurance companies could get concerned about this, partly because ill-conceived comingling or unrelated perils (maybe accidentally encouraging anti-selection) on umbrella policies.

A ”non-disparagement” clause is limited in its practical effect as far as a person’s other speech; it might be viewed in comparison to concepts like confidentiality agreements or conflict of interest.  A much grimmer idea would be refusing to hire or do business with someone who practice an “gratuitous”, non-whitelisted speech that didn’t pay its own way.  I haven’t really seen this happen much (although it might have caused me not go get media perils insurance renewed through NWU back in 2001, that’s another narrative).

The web has indeed democratized speech, and big social media sites (Facebook) are probably giving “amateurs” some practical cover from resistance from legacy businesses that feel threatened by the prospect of unregulated self-broadcast from consumers and employees.  But there are two sides to this, and real people have to make real livings supporting real families, in real life.  I would become very concerned indeed if this practice spread to big boys, like telecommunications providers (invoking the network neutrality debate, possibly) and insurers.

It is important to consider (at a later time) in some detail how user reviews affect the “sharing economy”, with services like Airbnb, Uber and Lyft (it goes both ways — consumers get rated, too), as was covered on Fareed Zakaria’s GPS on June 6, 2006 in an interview with the Airbnb CEO.

(Published: Saturday, June 4, 2016 at 1:45 PM EDT)