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Is the JTV Andesine Settlement a Good Deal?

By David Federman, Editor-in-Chief

There’s a lot of confusion and many myths about the historic accord between Jewelry Television and the purchasers of feldspar that was represented by the seller as natural and later alleged by the buyers to have been treated. If you’re one of those customers, here’s what you should know.

When first announced on October 22, the JTV Class Action Settlement seemed unexpectedly generous. The public was led to believe that all customers who purchased andesine-labradorite from JTV within a given four-year period (May 31, 2004 to July 31, 2008) were eligible for full refunds. These initial settlement summaries tempted us to write an editorial saying, in essence, Take the money and run, or Mix money and merchandise then run.

However, having read and studied the settlement in full, we’re not as euphoric as we were before, but we’re still supportive.There are two equally important components to the agreement by which it must be evaluated. The first is economic relief and the second is a combination of injunctive and education relief. The first component addresses making amends for past injury and the second addresses prevention of future injury.

We’ll take the second first because this is where most of the history that JTV is making will be made. If we read the settlement correctly, JTV is telling the world what it will do in the future when, or if, it sells andesine and hopefully any other gem that has fallen under a long, low cloud of suspicion. The buying public will have every right to expect the network to follow the highest standards of disclosure to which any jewelry retailer that we know of has ever pledged itself. To fulfill this commitment the network will beef up training of its sales personnel. On-air sales people will clearly reveal the exact nature of andesine’s color (copper diffusion) and JTV will reinforce this candor by prominently showing on-screen banners saying the same thing.

Such disclosures may not sound like much but they represent a seismic shift in product information and educational responsibility. Since JTV is a leader in shop-at-home gem and jewelry selling, they will be committing to a laudatory standard of truthful selling—one that could, and should, be adopted by its competitors. We’ll watch events carefully to see if JTV keeps its pledges.

Okay, now let’s look at the settlement from a standpoint of economic injury and relief.

Symbolism Versus Substance
If you, like me, believe that class action suits are a form of indemnification for economic injury, this settlement misses that mark. To begin with, JTV has committed to setting aside a maximum of $2 million for cash refunds. Since more than 100,000 notices of the settlement were sent out, that means, on average, $20 per person—hardly more than symbolic cash amends.

The settlement looks much better when evaluated from a cash + credit perspective. JTV is prepared to make merchandise exchanges. They have little choice.

Here’s the bottom line for all those wishing to cash in their andesine-labradorite merchandise. Mega-seller JTV is caught between its rocks and hard times. The settlement strongly hints that JTV is strapped for cash. But, then again, who isn’t in the current economy? Recent news of big layoffs at the network and postponement of plans to build a new headquarters indicate the company is in financial trouble. Presumably, lawyers for the plaintiffs saw the company’s books and, based on its recent sagging sales, hammered out the best agreement that could have been negotiated under the circumstances.

Both sides say that the network is showing good faith in this settlement—not just to the plaintiffs but to the entire buying public. JTV insists it took every precaution before starting its andesine campaign to make sure the material was all-natural. In support of this claim, it recently made public 18 certificates from the AGTA Gem Testing Center classifying their andesine-labradorite as all-natural. Based on these documents, the network feels it has every right to say it did its due diligence before rolling out its andesine merchandise, both loose and set. That is why they have not admitted to any wrong-doing as part of the settlement. They can prove they received full gemological clearance from leading labs with regard to the material. Moreover, the network has agreed to better train their employees and post on-air graphics that andesine has been diffused. As said before, such actions will set new standards for on-air treatment disclosure. That’s one very good outcome of this suit.

Both sides in the suit also take pains to note that JTV’s responsible behavior doesn’t stop there. Unlike other sellers of andesine that was purported to be all-natural and certified by labs as being so, JTV is cooperating fully in on-going scientific investigations into the nature of the feldspar it sold. Since the network is a giant in shop-at-home gem and jewelry sales, their new product candor will hopefully rub off on competitors. Seeing this determination to engage in ethical sales conduct, purchasers of andesine could likely find much of beauty, integrity and value if they want merchandise instead of or in addition to cash.

It is this broad element of reform built in to the settlement that makes us want to laud, if not quite applaud, it.

Here’s what aggrieved consumers can opt for in terms of economic relief.

Deep Pockets Can Be Empty Pockets
If approved, the Class action settlement will give JTV customers four relief options. Please note: The first three options pertain only to purchases of loose gemstones and they could bring relatively limited relief. Two of the options involve full or partial cash refunds, for which the network has to establish reimbursement funds to cover cash-outs. Although these reserves may seem shallow, they also reflect the network’s current cash crunch. JTV has limited its total payouts to $1 million for all those who request full cash refunds but would be willing, if necessary, to take partial store credit. Those who want cash only take a bigger gamble and must accept far more stringent terms. Let’s look at each option:

• Option #1: Cash Refund with Possible Store Credit.
  This option is, in our opinion, worded a bit too optimistically. The word “possible” should be replaced with the word “likely.” Keep in mind the following caveat: Customers only qualify for full refunds if their aggregate claims do not reach the reserve’s $1 million cap. Once above that figure, the settlement document says, “You will receive your share of a $1 million fund, divided on a pro rata basis, among all those who submit claims, plus a store credit for 40% of the remainder of your purchase price.”
  In short, only if total refund claims are at or below $1 million do claimants receive their full purchase price. Since it seems highly unlikely that JTV sold as little as $1 million worth of loose andesine-labradorite gems, this is really a combination cash refund and store credit option.
  
• Option #2: Cash Refund Only.
  As problematic as Option #1 seems, Option #2 seems even more so. Once Option 2 claims exceed $1 million, JTV has the right to cut that reserve in half to $500,000 and make restitution based on this considerably diminished sum. Claimants receive a share of this $500,000 set-aside divided on a pro rata basis among all those who elect to take this choice. They don’t even get a store credit.
  
• Option #3: Store Credit Only.
  Clearly, JTV wants to exchange goods rather than money. Option #3 allows customers to receive full store credit for each and every purchase of loose andesine-labradorite gemstones. But don’t expect your full dollar’s worth. Here’s what the settlement says:
  
  “Your store credit will be distributed to you in 4 payments over the course of a year. Your store credits may only be used to pay 50% of the purchase price of any new items you choose to purchase [emphasis ours].”
  
  In other words, you’ve got to match JTV dollar for dollar to get a full merchandise exchange. Let’s say you spent $1,000 for loose andesine-labradorite. This means that every quarter you are entitled to get a credit voucher good for $250 worth of goods—provide that amount equals half the purchase price of the item you want to buy. In essence, JTV is giving you a 50% discount on further purchases from them.
  .
• Option #4: Return of andesine-labradorite jewelry.
  Some consumers bought andesine-labradorite set in jewelry. These claimants get to keep their merchandise and, based on the amount and number of claims, can receive up to 20% of the purchase price.

Is the settlement fair?
Let’s be clear here. We’re not lawyers. And we don’t give legal advice. We’re simply describing the terms of the andesine class action settlement as we understand them and giving our reactions and reservations.

To help us in our deliberations we turned to Patti Geolat, a brilliant Dallas-based appraiser with considerable trial experience. She found it impossible to comment on the fairness of the settlement because there were, in her words, “too many unknowns.”

First, Geolat wants to know how cash reserve amounts were set.

“On what basis was JTV allowed to set the figure at $1 million each for its two cash reserves? Does that accurately reflect its exposure in this situation? Have they released any sales figures for andesine-labradorite loose stones in the period covered by the settlement?” she asks.

Knoxville lawyer Greg Coleman, who represented the plaintiffs in the andesine class action suit, says that counsel was given full access to JTV’s financial records and that the settlement factors in JTV’s current financial straits.

Second, Geolat wants to know if there are any mitigating circumstances in JTV’s favor in this class action suit. This is a delicate matter with all sorts of shading.

“Did JTV do all it could to ascertain that the gems were all-natural?” she continues. “And even then, could it be proven that JTV should have been expected to know that the material could have been treated and to doubt the labs? There were lots of suspicions expressed in the trade press about both the origin and nature of this material. I can only hope the lawyers who hammered out this settlement asked—and answered—all these questions.”

Coleman says that JTV demonstrated due diligence with regard to andesine and that in light of the misguided go-aheads it got from leading labs it should not have to admit to guilt in this matter. Nevertheless, he points to a “Mea Culpa” essay on andesine at JTV’s Web site that says the network is now convinced the material is diffusion-treated and will henceforth sell it as such. “That strikes me as acting honorably,” he says.

Link: www.andesineclassaction.com

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