On September 9, 2014, then-Governor Jerry Brown of California signed into law Assembly Bill No. 2365. The law, which went into effect in January of 2015, prohibits contracts for the sale or lease of consumer goods from including a provision waiving the consumer’s right “to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.” The law, which became colloquially known as the “Right to Gripe” Law, also makes it unlawful to threaten or seek to enforce such a provision or to penalize a consumer for making any statement protected by the law. The law imposes penalties ranging from $2,500 to $10,000 per violation and preserves “any other relief or remedy provided by law.”

A similar federal law was signed into law in 2016, and it provides an instructive contrast to the California Law. The federal Consumer Review Fairness Act of 2016 limits its protection to customer reviews, performance assessments, and other similar analyses of goods, services, or the conduct of the other party to the consumer contract. The federal law also differs in that it provides for thoughtful exceptions to the prohibition, including customer statements that contain trade secrets or unlawful content and customer statements that are “clearly false or misleading.”

A bill that is working its way through the Utah State Legislature also limits itself to clauses that restrict “consumer reviews” and provides a number of exceptions. A Maryland statute prohibiting non-disparagement clauses in consumer contracts was signed into law in the wake of California’s “Right to Gripe” Law, but the Maryland law also carves out prohibitions on disclosures of proprietary information and specifically states that it does not limit defamation lawsuits against consumers.

Because the California law is written so broadly and without specific exceptions or exclusions, plaintiffs’ attorneys have filed class actions that are testing the limits of the law’s application. The law prohibits a certain type of language in consumer contracts—and these contracts generally use the same language with every customer—so the claims are ready-made for class actions.

Recently, suits have been filed against financial institutions challenging contractual prohibitions on using the financial institution’s money-transfer services in a way that exposes the financial institution to liability or brand damage. The context makes it clear that these provisions were intended to prohibit certain types of conduct, not statements. But without much case law interpreting the statute and defining the contours of its prohibition, these cases may be expensive for companies to litigate, even if they ultimately prevail.

We will be closely following these cases as they develop (as will, I am sure, the plaintiffs’ bar). Their outcome could have a significant impact on how many of these class actions are filed in the coming years and how consumer contracts are drafted to avoid having to defend against them.

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