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Jury rules against Blue Nile in Yehuda suit

By Michelle Graff
November 02, 2009

Seattle--A federal jury in Seattle recently ruled against Blue Nile Inc.'s $60 million lawsuit accusing The Yehuda Diamond Co. of false or misleading advertising because of its price comparisons with the online jeweler, according to a Yehuda news release.

The ruling came following a six-day federal trial held last month in the U.S. District Court for the Western District of Washington, where Seattle-based Blue Nile filed suit against New York-based Yehuda parent company Diascience Corp. in December 2007.

The suit stemmed from advertisements on the Yehuda Web site comparing the prices of Yehuda's clarity-enhanced diamonds to those of natural diamonds sold by Blue Nile, pointing out that Yehuda diamonds of the same carat weight, cut, color and clarity were priced significantly lower than those sold by Blue Nile.

In the initial suit, Blue Nile contended that the ads did not tell the full story and accused Yehuda of unfair competition, copyright infringement and violations of the Washington Consumer Protection Act.

Blue Nile, according to the release, was asking for exemplary damages of $60.2 million based on alleged actual damages of $20.1 million.

"These diamonds are not equivalent, and Yehuda's Web site falsely represents that they are," the suit stated. "Moreover, to emphasize a false equivalence between Yehuda's artificially enhanced diamonds and Blue Nile's natural diamonds, Yehuda wholesale copied portions of Blue Nile's copyright-protected Web site and displayed the Blue Nile Web pages on the Yehuda.com homepage."

However, Yehuda, which said it removed the copyrighted material from the Blue Nile Web site after one day, has consistently contended that its price comparisons are in the best interests of consumers, the releases states.

After four and a half hours of deliberations, the jury ruled in Yehuda's favor, dismissing Blue Nile's federal and state claims that Yehuda was engaging in false or misleading advertising.

"This is a momentous victory for all consumers and for free-market competition," Dror Yehuda, president of Yehuda Diamonds, said in the release. "In essence, the jury told Blue Nile that it can't use its massive size and legal muscle to prevent consumers from learning about lower-priced, quality alternatives to Blue Nile diamonds. In recent years, Blue Nile has preferred to fight is competitors in the courtroom (rather) than in the marketplace."

Reached about the verdict late Monday afternoon, John Baird, a Blue Nile spokesman, said the company was dissatisfied.

“We’re puzzled and we’re definitely disappointed by the decision," Baird said. "The bottom line here is we believe consumers are the real losers.”

In the release, Yehuda also vowed to press on with the lawsuit it filed against Blue Nile in U.S. District Court for the Southern District of New York in November 2008.

In that case, Yehuda contends that consumers who purchased rubies, emeralds, sapphires or jewelry containing those stones from Blue Nile were not informed that the gemstones had been treated to enhance their appearance.

In response to the suit filed by Yehuda, Baird said that Blue Nile provides education and guidance meant to empower fine-jewelry consumers, and that it offers information on its site describing both gemstone enhancements and gemstone care.
 
“We believe the lawsuit filed by [Yehuda] is merit-less," Baird said.
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