Statute Invalidating Non-Disparagement Clauses in Form Consumer Contracts Nears Enactment

by Paul Alan Levy

Tuesday morning, Judge Jim Jordan of the Texas District Court for the 160th Judicial District heard oral argument on our motion for an award of attorney fees and deterrent sanctions, as provided by the Texas Anti-SLAPP statute, following his decision under that statute to dismiss the lawsuit brought by Prestigious Pets, a local pet-sitting operation, both for defamation and to enforce a non-disparagement clause in its form contract.  But when I got back to my Texas co-counsel's office, I learned that, the night before, the Senate had passed the Consumer Review Fairness Act, a bill that would prohibit non-disparagement clauses in form consumer contracts.  The House adopted the bill earlier this year, and the president is expected to sign the bill, which has faced no public opposition.

This makes it a doubly bad year for Prestigious Pets, whose opposition to the requested fees and sanctions rests heavily on a request for judicial pity based on the claim that the Streisand Effect has destroyed its business and led to severe (indeed nasty) public criticism as consumers reacted adversely to news that this company was suing to enforce a non-disparagement clause.  Prestigious Pets had been saying publicly that it intends to appeal dismissal of its lawsuit; the new law should make such an appeal hopeless.

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