Legal Update: California Makes Non-Disparagement Clauses Illegal in Consumer Contracts

On September 9, 2014 Governor Jerry Brown signed into law AB 2365. The new law can be found in California Civil Code section 1670.8. It will prohibit the use of “non-disparagement” clauses in consumer contracts and will make any attempted enforcement of such clauses illegal starting January 1, 2015. The law carries statutory penalties, which may be sought by the consumer in a private civil action, which raises the possibility of class action.

This law will impact any contract covering a sale of consumer goods or services in California. It carries a maximum statutory penalty of $2,500.00 for first-time violations, and $5,000.00 damages for subsequent violations. Intentional, willful, or reckless violations of the law carry a maximum statutory penalty of $10,000.00.

The bill was passed in reaction to online consumer agreements containing an increasing non-disparagement clauses, which the legislature viewed as contrary to public policy. The bill is also known as the "Yelp" bill, and has the aim of protecting online consumer review forums.

For an outstanding synopsis of the law, see attorney Songmee L. Connolly's (Fenwick & West) article here. 

The bill's text can be found here. 

Underdog Law Blog: Payday Lender Liable for Expenses Incurred Prosecuting its Bankruptcy Violation

Check out another great blog entry by Attorney Michael Fuller regarding the Ninth Circuit's recent decision in In re Snowden, a case that has a major impact on a consumer debtor's right to attorney fees in contested stay violation cases brought under 11 U.S.C. section 362(k). The court adopted a more abstract standard to determine whether a consumer debtor is entitled to attorney fees throughout a 362(k) action. The court asks whether the petition is using the stay as a "shield" or as a "sword." This inherently requires a factual analysis of the alleged stay violation, and whether or not the defendant has remedied the violation, with no strings attached. In conjunction with Schwartz-Tallard, it follows that absent this admission of liability by remediation, the defendant is subjected to ongoing liability for attorney fees under 362(k) until final adjudication.

See the article at the Underdog Law Blog here: http://www.underdoglawblog.com/2014/09/payday-lender-liable-for-expenses.html

Underdog Law Blog: Wells Fargo Gets Free Pass in Ninth Circuit

Check out Michael Fuller's blog entry on the Ninth Circuit's decision in In re Mwangi. There, the Ninth Circuit Court of Appeals upheld a controversial practice employed by Wells Fargo whereby it freezes debtor's bank accounts when they file Chapter 7 bankruptcy. The practice can put individuals in a helpless position, particularly when they need access to their accounts to pay for food, gas, and utilities following the filing of their Chapter 7 cases.



Underdog Law Blog: Wells Fargo Gets Free Pass in 9th Cir. Bankruptcy