Majors
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GemEx files false-advertising suit against Zale
December 16, 2008
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| The reports being used to accompany the sale of Zale's new "Celebration" diamonds are the subject of a lawsuit filed by GemEx Systems. |
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Milwaukee--GemEx Systems is accusing Zale Corp. of false advertising in a lawsuit that claims the jewelry chain is deceiving consumers by stating that the grading reports accompanying its new, branded "Celebration" diamonds measure light performance.
GemEx, the Wisconsin-based company that provides diamond-evaluation services to the jewelry industry, filed the lawsuit on Dec. 8 in the U.S. District Court for the Eastern District of Wisconsin, naming Zale Corp., Zale Delaware Inc. and GemEx rival company, GS Laboratories of America (GSL), of Irving, Texas, as defendants.
GemEx claims in the lawsuit that it was involved from the start with the development of the Celebration diamond, but was left out of the project just before Zale launched the branded diamond this fall.
According to the lawsuit, Zale approached GemEx about the rollout of the Celebration diamond in the summer of 2006. Over the next two years, the two companies worked closely together on the project, GemEx claims in the lawsuit, with the understanding that, when all was said and done, Irving, Texas-based Zale would purchase GemEx trademarked grading reports, which measure a diamond's "light performance," for the launch of its branded Celebration diamond.
This purchase required that Zale's suppliers of the Celebration diamond would be provisioned and trained at GemEx's expense to use the GemEx BrillianceScope Analyzer to evaluate the diamonds they provided to Zale.
Instead, the lawsuit says Zale is now using grading reports from a GemEx competitor, GSL, reports that GemEx states do not accurately measure light return or the type of light-performance measurement that is part of GemEx's trademarked reports.
"After accepting the benefit of the services and materials provided by GemEx, Zale retained the services of a GemEx competitor, GSL, that provided Zale with substitute diamond analysis reports (OGI Firetrace reports)," court documents state.
Zale spokesman David Sternblitz said the company believes the lawsuit is without merit and intends to fight it vigorously.
In the lawsuit, however, GemEx claims that "Zale and GSL have falsely advertised the substitute OGI Firetrace report as the equivalent of GemEx's report, using words, images and symbols to convey the message that the OGI Firetrace is a measurement of light properties, which serves both to mislead consumers and to disparage the quality of GemEx's services. An OGI Firetrace report is based on measuring the physical shape of a diamond and applying computer simulated ray-tracing analysis using the diamond's shape data...A ray-tracing analysis as applied to a cut diamond does not measure light return or Light Performance of a diamond."
GemEx claims in the lawsuit that only its "BrillianceScope Analyzer measures the light return or light performance of a diamond in the manner that Zale has represented to consumers."
According to the lawsuit, between 2006-2008, GemEx trained Zale's staff on the sale of the branded diamond, trained suppliers on the cutting and testing methods necessary to produce a Celebration diamond and provided the suppliers with its patented, diamond light-performance-measuring device, the BrillianceScope Analyzer, among other things.
In January 2008, Zale requested that GemEx be prepared to deliver an additional 758 BrillianceScope Viewers, an in-store sales aid, to Zale stores, requiring GemEx to manufacture the units.
As late as spring 2008, GemEx was assisting Zale with the program--provisioning the chain's suppliers with BrillianceScope Analyzers and "extensive" training to assist in the rollout of the Celebration program, court documents claim.
Then, in July 2008, "Zale requested that GemEx place a hold on the shipment of all previously ordered BrillianceScope Viewers," according to court documents.
After that, "Zale management did not successfully respond to repeated requests to meet in Dallas with the senior executives of GemEx and subsequently stopped all communications with GemEx regarding the Celebration program."
GemEx is seeking monetary damages and an injunction barring Zale from making "false and misleading misrepresentations" regarding the OGI Firetrace reports and from using any "substitute report claiming to measure light or referring to the attributes of light, in connection with the sale of the Celebration diamond" because it is likely that Zale employees trained in GemEx will misrepresent the substitute reports as the equivalent of a GemEx report, the suit says.
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Majors
A shareholders' class-action lawsuit has been filed against Zale Corp., its chief executive officer and three former executives, claiming the Irving, Texas-based, 1,931-store chain deliberately deceived investors. Read More
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