California Bans Non-Disparagement Clauses In Consumer Contracts

On September 9, 2014, Governor Brown signed into law a ban on non-disparagement clauses in California consumer contracts.  Intended principally to protect Yelp-style customer reviews, the law includes a private right of action and civil penalties of $2,500 for the first violation, $5,000 for each subsequent violation, and $10,000 for a willful, intentional or reckless violation.  Notably, the statute is silent on the issue of whether a company commits more than one violation when it uses a form contract with multiple consumers, making a wave of class actions likely.

The full text of the new statute, California Civil Code Section 1670.8, is available here.