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Friday, October 12, 2007

Judge Rejects $19 Ionic Breeze Class-Action Settlement: SF's Sharper Image Gets Blurry Financial Outlook

Posted By on Fri, Oct 12, 2007 at 11:47 AM


Never mind that huge sucking sound coming from The Sharper Image's corporate headquarters on The Embarcadero. It's just the air coming out of the retailer's hoped-for settlement of a consumer class-action lawsuit involving its Ionic Breeze air purifier.

A federal judge in Florida has rejected a puny settlement that would have awarded a $19 store coupon to purchasers of the Breeze (which costs up to $350 a pop), if you bought the gadget before the company equipped it with an ozone-reducing attachment.

It's more bad news for the San Francisco-based specialty retailer whose sales grew stale under ousted founder and chief pitchman Richard Thalheimer and have worsened since a new management team took over last September.

From the start, critics called the proposed $19 settlement a ...

lame deal for consumers, and U. S. District Judge Cecelia Altonaga in Miami apparently agrees.

Not surprisingly, Leslie Brueckner, a lawyer for Public Justice, a consumer advocacy group that joined with attorneys general from 27 states to oppose the settlement, thinks the judge's rejection is right on.

"What can you buy for $19 at a Sharper Image store besides a trick golf ball or some socks?" she asks.

The ruling opens the way for a competing class-action lawsuit (initiated in San Francisco) that was on hold pending the Florida ruling.

That lawsuit seeks full refunds for the affected Ionic Breeze buyers. A long court battle is almost certain, with the outcome being anybody's guess. Experts say a worst-case scenario could put the company on the hook for up to $900 million and drive it toward bankruptcy.

According to the SF Business Journal:

The company, which reported a 39 percent drop in sales in September, also reported to the Securities and Exchange Commission that Daniel Nelson, its controller and chief accounting officer, quit Oct. 8. Rebecca Roedell, who is the company's CFO, will take on Nelson's accounting role.

--Ron Russell

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