General Motors Issued Massive Civil Penalty over Recall, Minnesota Passes Cellphone Kill Switch Law
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UPDATED: May 17, 2014
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The fallout from General Motors’ massive ignition switch recall continues with a historic civil penalty issued by the federal National Highway Traffic Safety Administration. In Utah, a federal judge issues a default judgment against an online company that attempted to collect $3,500 over a negative review. Finally, Minnesota has taken a groundbreaking step in an effort to curb the theft of cell phones by passing a kill switch law.
Feds Fine General Motors $35 Million over Defective Ignition Switches
On Friday, the National Highway Traffic Safety Administration (NHTSA) agreed to a historic civil penalty with embattled vehicle manufacturer, General Motors (GM). The GM consent order, which is enforceable in federal court if the company does not comply, represents an aggressive increase in federal regulatory authority over vehicle manufacturers that the NHTSA hopes will send a message to other companies that emphasizes the importance of maintaining high standards of safety in car production. The federal government’s case against GM arose due to the company’s February announcement that it would recall certain models for having a defective ignition switch that could move out of the “run” position and prevent the airbags from deploying in the event of a crash.
Officials at the NHTSA believe that the $35 million fine imposed on GM will increase its power to issue large fines for manufacturing oversights that create dangers to consumers, establishing the agency’s commitment to ensuring vehicle safety standards are met. In addition to the significant fine, GM has also agreed to strict federal oversight to ensure the safety concerns in the company’s defective models are not repeated. Under the consent order, the NHTSA will have full access to GM’s investigation of the recall, and be allowed to take steps to speed up the recall process should the company not move quickly enough.
The General Motors ignition switch recall, which has already included 2.6 million vehicles, is far from over, but the historic fine will ensure that this case will be remembered. As GM, under close federal scrutiny, takes steps to revamp its safety and recall policies, other vehicle manufacturers are no doubt well aware of the NHTSA’s aggressive approach to vehicle safety and its willingness to doll out significant fines when a company steps out of line.
KlearGear Not Permitted to Collect $3,500 for Negative Online Review
Earlier this month, KlearGear.com, after failing to show up to defend itself, received a default judgment in federal court relieving John and Jennifer Palmer of a $3,500 debt the company assessed after Jennifer posted a negative online review about the company’s poor service. The incident occurred in 2009 after Jennifer wrote a negative critique of KlearGear’s service in delivery of a $20 keychain. Three years after the review, KlearGear sent an email to John Palmer demanding that the negative review be deleted or the couple would be assessed a $3,500 fine under the company’s non-disparagement clause – which allows the company to assess the penalty over negative online posts.
Judge Dee Benson determined that the Palmers do not, and never did, owe KlearGear money under the company’s non-disparagement clause. Going further, Judge Benson found KlearGear liable for violating the Fair Credit Reporting Act, for defamation, and for intentional infliction of emotional distress. A damages hearing will be held in early June to determine if KlearGear owes the Palmers money for the incident. Because the Palmer’s judgment was won after KlearGear declined to appear in court to defend itself, the legality of the company’s non-disparagement clause remains unsettled.
As online reviews have become increasingly important to internet businesses, it is not surprising that companies take steps to discourage negative posts. Non-disparagement clauses like the one used by KlearGear are reportedly becoming more popular amongst companies who conduct online businesses, leaving consumers intimidated from posting any review that can be construed as negative. As challenges to non-disparagement language work through the American legal system, it is likely that the question will need to be settled by state or federal legislators. California is already considering a bill on the subject, and the issue has also been brought up in the US Congress. Until the matter is settled by legislation, consumers intimidated by non-disparagement clauses can take heart by the language in the Palmer v KlearGear decision as an indication that the judiciary will not accept the clause on its face.
Minnesota Enacts Cell Phone Kill Switch Law to Deter Smartphone Theft
Minnesota has passed a cell phone kill switch law that would require any smartphone “sold or purchased in Minnesota” to be “equipped with technology designed to render the device inoperable in the event of theft or loss.” The law, which will apply to phones sold starting next June, comes at the behest of law enforcement authorities who have pressed states to take action to discourage thieves from stealing smartphones. As smartphone theft becomes an increasingly common problem, Minnesota legislators hope that passing a kill switch law will curb crime by making the devices useless if stolen.
Minnesota is the first state to take action, however, legislators in New York, California, and Illinois are working on passing similar bills. Although critics of the law claim that it will not be able to keep pace with cell phone technology, it seems that the policy is quickly gaining momentum across the country as law enforcement turns to state legislature to help curb rampant smartphone theft.