In March of 2016, Katrina Arthur and her husband were guests at the Abbey Inn in Nashville, Indiana. In statements made to the press and to the hotel after their stay, the Arthurs said that they experienced problems at the hotel as soon as they arrived, noting that their hotel room was unkempt. In fact, upon entering their room, the Arthurs claimed that they checked the bed sheets and noticed dirt and hair. The Arthurs claimed that the hotel had had no front desk assistance and there was no housekeeping available to otherwise correct the problem. As a result, the Arthurs cleaned the room themselves and thereafter stayed in the room.

Subsequent to their departure from the Abbey, the Arthurs received an email from the hotel asking for a review. The Arthurs decided to be honest and to tell the social media world how disgusting the hotel was and, as such, they gave the hotel a glaringly negative review. Once the hotel received the negative review, the Arthurs were charged $350.00 and the Arthurs were then threatened with legal action by the hotel. The hotel's position in issuing this charge was based on their existing policy that "Guests agree that if guests find any problems with our accommodations, and fail to provide us the opportunity to address those problems while the guest is with us, and/or refuses our exclusive remedy, but then disparages us in any public manner, we will be entitled to charge their credit card an additional $350.00 damage. Should the guest refuse to retract any such public statements legal action may be pursued." In response, the Arthurs decided to withdraw the review but were never returned the $350.00 charge.

On December 15, 2017, the State of Indiana Attorney General's office filed a lawsuit against Abbey Management which owned and operated the Abbey Inn. The State alleged that the hotel's policy of penalizing customers for posting negative reviews was a violation of Indiana's Consumer Sales Act by enforcing a customer review policy that is "unfair, abusive and deceptive." In its complaint, the State asserted that the policy was posted on the Abbey Inn website but guests were not provided with such a policy when they agreed to stay at the hotel.

Moreover, the email requesting customers leave an online review did not warn customers of significant consequences for posting a disparaging or negative review or were the policies posted in common areas where they could readily be seen the lawsuit said. The State also requested injunctive relief against the Abbey Inn as well as civil penalties under the Consumer Sales Act.

In January of 2018, the former hotel owner responded with a motion to dismiss the suit claiming that the complaint filed had no basis under Indiana law and that where the parties entered into a contract as a condition of their business relationship the Court had no right to interfere with that relationship. The case is now under review.

B. The Consumer Review Fairness Act now allows consumers to file negative reviews.

What is crucial to understand is that the "gag clause" used by the Abbey Inn to restrict a customer's right to issue a negative review is now illegal after President Obama signed the Consumer Review Fairness Act into law in December of 2016 with the effective date of the Act set for March of 2017. The federal statute prohibits businesses, such as the Abbey Inn, from using contract provisions to restrict consumers' ability to post critiques and also prevents businesses from asserting a copyright interest in the reviews. The purpose of the federal legislation was to create more clarity about the legal viability of non-disparagement clauses which have been litigated in several states.

The Act voids any form contract clause, like in Arthur's case, that seeks to prohibit the purchase of goods or services from submitting a negative review of a business, or that seeks to impose a penalty or fee against the purchaser for doing so. On the other hand, the Act does not stop a business from suing for defamation, libel, or similar causes of action. As this new federal law was enacted after Arthur's case (and does not have any retroactive application) it cannot be used by the State of Indiana in its current prosecution of the Abbey Inn. Thus, the State will continue its prosecution against the Abbey Inn under the Consumer Sales Act only.

Businesses and consumers need to be aware of this new federal legal protection allowing consumers to issue complaints against businesses particularly in cases where the complaints are based on specific facts. Under the Act, state attorneys general and other consumer protection offers are now empowered with the authority to file complaints on behalf of states' residents for violations of the Act. If you have a business that is currently utilizing a gag order or non-disparagement clause in its contracts or you are a consumer who has been the recipient of a gag order please call the Katz Law Group at 508-480-8202 for guidance as to your legal rights.