Yehuda amps up gem lawsuit against Blue Nile

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Yehuda amps up gem lawsuit against Blue Nile

By Michelle Graff

January 16, 2009

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New York--Yehuda Diamond Co., which claimed in a lawsuit last year that Blue Nile was selling treated emeralds to consumers without proper disclosure, is now accusing the online retailer of selling rubies and sapphires without properly notifying consumers of treatments, according to court papers.

On Jan. 15, New York-based Yehuda added an amended complaint to the original lawsuit filed in U.S. District Court for the Southern District of New York. The revised suit alleges that the rubies and ruby jewelry that the defendant Blue Nile sells via its Web site contain "numerous fractures prior to having their clarity enhanced via oil filling or otherwise," the lawsuit states.

It also states that, "the sapphires (including those in jewelry) that defendant Blue Nile sells...are oil filled (including filling by oil, wax, resin or other colorless substances) to enhance their clarity."

According to the amended lawsuit, Blue Nile "deliberately, willfully and intentionally withheld and withholds from consumers...the fact that the clarity of Blue Nile's rubies, sapphires and emeralds (including loose rubies, sapphires and emeralds and ruby-, sapphire- and emerald-containing jewelry) is enhanced by oil filling and/or glass filling."

After submitting three rubies purchased from Blue Nile to the American Gemological Laboratory for certification, Yehuda received a report from the lab indicating that the stones exhibited evidence of moderate or faint to moderate clarity enhancement that the lab classified as "inorganic (flux type)," court documents stated.

The suit says that this means the stones underwent a treatment process known as flux healing to "heal" open fractures.

"On information and belief, rubies that have been subjected to flux healing contain synthetic ruby and glass," the suit alleges. "The rubies (including those in jewelry) that defendant Blue Nile sells via the Web site ... are subjected to a flux healing process to enhance their clarity. As a result, on information and belief, the rubies sold and/or offered for sale by Blue Nile via its Web site contain synthetic ruby and glass."

Blue Nile does not disclose on its Web site or elsewhere that the rubies are clarity enhanced by flux healing, the court papers say.

The suit goes on to state that the enhancements affect the value of the stones, and that the treatments are not permanent processes and require special care when it comes to repair and cleaning.

Finally, the amended lawsuit claims that Blue Nile's actions amounted to "unfair and deceptive business practices" under New York State law and "false advertising" under the federal Lantham Act.

Yehuda is asking the court to prohibit Blue Nile from making "false and misleading statements" and to offer consumers who purchased rubies and sapphires, in addition to emeralds, a full and complete refund, the suit says.

Yehuda's original lawsuit involving only emeralds was filed in November and reported by National Jeweler on Dec. 2.

At the time, Blue Nile issued a statement to National Jeweler saying that it offers consumers only high-quality, authentic gemstones and that the Yehuda suit stemmed from a grudge.

"Yehuda's claims against Blue Nile are meritless, and their action is in response to Blue Nile's false comparative-advertising case filed against Yehuda last year," the statement read.

Blue Nile and Yehuda first clashed in court in February 2008, when Blue Nile sued Yehuda parent company Diascience Corp. of New York claiming that advertisements on Yehuda's Web site comparing Yehuda's clarity-enhanced diamonds to the natural stones sold by Blue Nile are misleading.

Although a trial in that case was set for January, it was expected to be pushed back to February, according to Yehuda President Dror Yehuda.

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