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.
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