The Indiana Attorney General’s office and Abbey Management Inc. have reached an agreement regarding a policy that restricted customers from making negative online reviews.

Abbey Management Inc., which operated the Abbey Inn in Nashville, will have to refund customer Katrina Arthur $350. That was the penalty which she was charged in 2016 for writing a review that was critical of the condition of the inn’s rooms.

Abbey Management Inc. also will have to pay $5,000 to the state of Indiana as reimbursement for investigating and prosecuting this case, according to paperwork filed in Brown Circuit Court on Feb. 28.

The inn made international headlines in December 2017 when the attorney general’s office filed suit against the hotel’s management for allegedly violating Indiana’s Deceptive Consumer Sales Act.

Arthur told the attorney general’s office that she arrived at the inn in March 2016 to find the room she had rented unkempt, with water pressure and air conditioner problems and smelling like sewage, and she could not find a staff person to talk to. Arthur said she later received an email from the hotel asking her to post a review, and she did.

She told the attorney general’s office that she took the post down upon receiving a threat of legal action from owner Andy Szakaly, and that her credit card was charged an extra $350.

The attorney general’s office alleged that the Abbey Inn’s policy restricting negative online reviews was “unfair, abusive and deceptive.”

In the judgment, which was settled without a trial, Szakaly, president of Abbey Management Inc., agreed to not using any clause in policies that prohibits a consumer from making “non-defamatory negative statements or reviews regarding their stay under the threat of financial penalty,” or initiating, implying or threatening any legal action because of those comments.

Szakaly said in December 2017 that the inn had stopped using the policy in question.

He said it was put into place because of what he called “social media blackmail,” in which guests would threaten to post something negative if they didn’t get refunds.

He also had argued that the attorney general’s lawsuit violated the inn management’s right to free speech by restricting its freedom to enter into a contract with its guests.

The Abbey Inn closed for a time after receiving publicity about this incident. It has since reopened as The Yellowwood and is being operated by Szakaly’s daughter.

“We are pleased to see a resolution of this case that recognizes that people have the right to truthfully complain about bad service,” Attorney General Curtis Hill said in a prepared statement. “No one should be afraid they might be penalized for exercising this right.”

He added that anyone who believes they have suffered retaliation or been threatened as a result of posting a truthful review should contact his office at indianaconsumer.com or 800-382-5516.