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Sterling Says Zale Misinterprets an Advertiser’s Legal Burden

Plaintiff Claims Defendant Lies to All Celebration Fire Consumers

Dec 21, 2012 5:55 PM   By Jeff Miller
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RAPAPORT... Sterling Jewelers reiterated its request today for a preliminary injunction against rival Zale citing the public interest, truth in advertising and the need to protect consumers from false and misleading information allegedly brought by Zale's Celebration Fire diamond's tagline: ''the most brilliant in the world.'' Sterling sued Zale over the advertising claim in November and this week both parties presented their evidence in U.S. District Court in Northern Ohio.  Sterling filed an initial brief after the hearing on December 19 (read story) and Zale filed its response on December 20 (read story).

In its new submission this afternoon though, the plaintiff argued that Zale's brief from yesterday contained two central fallacies. First, Zale pretended ''not to understand that diamonds are not identical commodities like cars or televisions even though Zale, like all jewelers, markets each diamond as individual and unique,'' Sterling stated. The plaintiff added that an advertising claim for diamonds cannot be supported on an average “line” or “cut” basis, but, because each stone is known to be materially different, the claim must be proven true for all,  or else appropriately qualified.

Secondly, Sterling argued that Zale did not understand that when making a comparative claim against all competitors, advertising law does not require this claim to be proven  against just some competitors or even a representative sample.   ''If any competing diamonds equal any Celebration Fire in brilliance, Zale's claim is false,'' Sterling's filing stated. And according to the plaintiff, the evidence shows that many competing diamonds are more brilliant than every Celebration Fire tested to date.

Celebration Fire diamonds are individually certified and detailed on their own personal certification card, identifying all the qualities that make it unique, the attorneys wrote. ''The card also contains important light performance rating information that is performed on the diamond by a gem grading company.

‘’The light performance rating information that comes with the diamond is not an average brilliance grade for the entire line or cut.  It is that diamond’s individual brilliance rating, and the consumer is told that this individual rating establishes her diamond to be more brilliant than any other available,'' Sterling said, thus concluding that Zale cannot truthfully claim superior brilliance predicated on an (undisclosed) average PGGL brilliance score. ''Zale must substantiate that claim as to the diamond this consumer bought, not as to some other, better-performing Celebration Fire that Zale selected for its comparative testing.'' sterling lawsuit

The plaintiff alleged that  Zale introduced a distribution of Celebration Fire brilliance scores as evidence that  was precluded in questioning a witness who was not an expert and had never seen the document, at the injunction hearing.  Zale's use of this document shows that it deceives over 10 percent of Celebration Fire consumers, Sterling concluded. ''Zale dismisses these low-performing diamonds as 'outliers.'  The unfortunate consumers who bought these outliers at a large price premium over other diamonds, having been deceived into thinking they were getting the most brilliant diamonds available, would not shrug it off so easily. And Zale knows that a much higher percentage of its Celebration Fire would be beaten by many competitor diamonds that were not tested, and that even the most brilliant Celebration Fire diamonds would be beaten by some. Zale lies to 100 percent of Celebration Fire consumers by telling them they have bought the most brilliant diamond,'' Sterling contended.

Attorneys for the plaintiff said Zale must show greater brilliance than all competing diamonds, not just some, or the company ''fundamentally mistakes an advertiser’s legal burden in substantiating a superiority claim, which is that it must prove superiority against all competitors – not some, and not a 'representative sample.'''

The plaintiff submitted and cited case law showing there is no such thing as a “representative sample” of different brands or models of any product because brands and models are not interchangeable for substantiation purposes. ''Moreover, regardless of how many competitors the advertiser has tested against, a supremacy claim becomes deceptive if even one competitor is shown to be its equal. Zale did not find such a competitor only because its 51-diamond comparison was a determined effort to look the other way. It chose three above-average Celebration Fire diamonds (PGGL brilliance scores of 186, 188 and 191, versus a purported average of 184) and avoided comparing them against well-known lines of diamonds, such as the Solasfera, that are the most comparable to Celebration Fire in pricing and cut design. This is not to mention the Brilliant 10, the same diamond as the Celebration Fire sold under another trademark, whose existence alone invalidates Zale’s’ supremacy claim,'' Sterling said.

Zale defended the use of a “novel protocol” for its test  but  never introduced evidence that there was any protocol, either in the form of a document or any witness with first-hand knowledge of the design, sampling universe or method, selection of competing lines, blinding, chain of data custody or data interpretation. ''The comparison was disowned by Zale’s witness, Gil Hollander, in his hearing testimony, and by ImaGem and PGGL in their specifically negotiated disclaimer for the Celebration Fire certificate terms and conditions.''

Sterling said that Zale failed to recognize that its claim applies to each diamond individually and that each one of those diamonds must be superior in brilliance to any other. ''To create and market such a superior group of diamonds is possible, but it would require being much more selective than Zale is in deciding which diamonds can be called Celebration Fire,'' attorneys wrote.

Zale allegedly misinterpreted  testimony by Sterling's ''diamond brilliance measurement expert'' Randall Wagner, who defended testing methods against  challenges by Zale's  witnesses and his own competitor, Lalit Aggarwal  of ImaGem, and Dr. Jose Sasian, an academic optician who has never seen any of the devices in question, according to the plaintiff.

Wagner tests and describes the brilliance of individual diamonds, not lines or cuts of diamonds because lines and cuts of diamonds don’t have a brilliance measure.  Wagner tested eight Celebration Fire diamonds and did not maintain that this was a sufficiently large or representative sample to generalize all, but each of the eight diamonds was marketed and sold with the representation that it was more brilliant than any non-Celebration Fire diamond, according to Sterling. ''None of them actually was. All were surpassed in brilliance by many diamonds that  Wagner had previously tested. All eight diamonds were marketed deceptively.''

While Sterling concluded that  Wagner’s comparison proved Zale’s claims false, there is no way that it could have proven them true for ''to prove Zale’s claims true, it is necessary to test all Celebration Fire diamonds, and it is necessary to test them against all comparable competitors.''

The plaintiff also charged Zale with devoting a significant portion of its brief to criticizing Sterling witness Michael Rappeport’s consumer perception survey, which found that 25 percent of consumers interpreted Zale’s “most brilliant diamond in the world” claim to mean that the Celebration Fire diamonds are more brilliant than any other diamonds.

''Those criticisms are the same as those that are contained in the report of Zale’s expert, Dr. Jacob Jacoby, which the court excluded at the preliminary injunction hearing on December 17, 2012,'' said Sterling. ''Zale’s post-hearing brief heavily paraphrases each of Dr. Jacoby’s criticisms in the same order as they appeared in the excluded report, attempting an end-run around the court’s exclusion order by presenting Dr. Jacoby’s rebuttal report as attorney argument. In any event, Dr. Rappeport fully defended his study against these criticisms in his testimony on December 17.''

Zale also mischaracterized the testimony of expert witness Sasian by claiming that while both the ImaGem and GemEx methodologies are generally accepted in the diamond industry, neither is an industry standard, according to Sterling. ''However  Sasian testified that there is no single standard or methodology widely accepted in the jewelry industry to measure the property of brilliance. He concluded his hearing testimony by stating that neither the GemEx system nor the ImaGem system met his criteria for being 'generally accepted' across the entire diamond industry.''

Secondly, Sterling defended filing its lawsuit in the midst of the Christmas rush and added that it had not sued other advertisers for comparable brilliance claims because it ''is not responsible for policing the entire diamond industry’s advertising claims. Zale misleadingly characterizes its 'most brilliant' claim as effectively identical to brilliance claims by other advertisers.’’

The Solasfera diamond, for example, is advertised as the “highest performing diamond in the world on GemEx BrillianceScope tests,” but as Wagner testified, this statement is more qualified than Zale's claim and is substantiated because the selection process for Solasfera diamonds requires a minimum brilliance score as “quality control,” Sterling explained.   The advertising of the Leo Diamond is also  distinguishable as it “delivers measurably more brilliance than other diamonds of similar quality and grading”  and contains no broad supremacy claim against all diamonds in the world, and contains appropriately limiting qualifiers, Sterling said. ''All of Zale’s finger-pointing is irrelevant to injunctive relief, because regardless of what Zale’s competitors are doing, the public interest is served by stopping Zale from deceiving consumers.''

The plaintiff added that even just by removing the tagline “most brilliant diamond in the world,” Zale could not write it off as puffery, for that is “not capable of measurement or which consumers would not take seriously – for example, an advertisement touting a foreign sports car as ‘the sexiest European.’”

''A specific, measurable claim of product superiority is not puffery.  Here, the parties’ respective experts agreed, and Zale continues to admit  that 'brilliance' is an objective, measurable characteristic of a diamond. The deletion of Zale’s reference to testing would not save its claim; it remains an objective representation of superiority, which is false and should be enjoined.''

Attorneys said that  Sterling demonstrated its motion for preliminary injunction and that it is likely to succeed on its Lanham Act and Ohio Deceptive Trade Practices claims against Zale. The attorneys explained that injury to their client is presumed upon demonstrating Zale's false claim. Zale’s advertising campaign is not enjoined, future harm to Sterling would be impossible to quantify because, among other things, Sterling is losing customers to Zale and jewelry customers are particularly loyal to the retailers from whom they have previously made purchases.

''Many of these consumers likely will make their future jewelry purchasers from Zale as well.  Thus, the loss of these customers is irreparable harm, which cannot be compensated by monetary damages,'' stated Sterling.

 

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