Class-Action Suit Filed Against Apple

[Scubawarrior]

Just before a bill to curb class-action lawsuits headed to President Bush for signing, Apple Computer was targeted in a class action.

The lawsuit, which the new law won't affect, was filed Thursday in California Superior Court in San Francisco on behalf of consumers and resellers of Apple (nasdaq: AAPL - news - people ) products. It seeks to include in the consumer class any person in the U.S. who purchased Apple products or repair services since Jan. 1, 1995, except for someone affiliated with Apple or the lawsuit.

The plaintiffs allege that Apple failed to fully honor service contracts and warranties, didn't get repair and service businesses properly licensed, stole trade secrets from its own resellers, and sold used computer equipment as new.

They are charging Apple with Unlawful Business Practices, Misappropriation of Trade Secrets, Breach of Contract, and violations of the Consumers Legal Remedies Act and the Song Beverly [Consumer Warranty] Act.

Apple could not be immediately reached for comment on the lawsuit.

The legal team handling the case includes two lawyers, J. David Franklin and Alexander Schack, who in the early 90s represented consumers and dealers in lawsuits against wireless service providers. Schack says those suits have similarities to this case against Apple, and most of those suits were settled.

The lawyers are also already representing several aggrieved current and former Apple-authorized resellers who have sued the company in separate actions.

In one complaint, longtime Apple dealer Elite Computers & Software contends that Apple sold product in its in-house retail stores at a net loss--an 8% net loss in 2002, Elite figures--eliminating the "level playing field" Apple had promised would exist between independent resellers and Apple's own stores. Apple stores debuted in 2001. Apple's website lists 102 Apple-owned stores, 98 of them in the U.S.

"When no-one else would look at Apple, we were there," says Elite founder Thomas Armes. "We were once Apple specialists and now we're legal specialists... We are welcoming any other interested parties that would like to discuss or possibly join our group." Armes runs the website www.tellonapple.org. He says his business had $20 million in sales in 2002 but that he has had to close all five of his stores.

Other resellers are also going out of business, including Tom Santos, who shuttered his store, MACadam, in January after 16 years. Neighborhood Computer Store's Andrew Gold, who says he has sold Apple products for 25 years (Apple was incorporated in 1977), says his sales are off 80% since Apple opened its first store. "My days are pretty numbered," he says. Gold remains an authorized Apple dealer. Santos and Gold are also suing Apple.

Meanwhile Apple sales have soared along with its stock, which has quadrupled in a year to $87.81 at yesterday's close. Apple, which makes the popular iPod music player, earned $276 million on sales of $8.3 billion last year.



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