December 4, 2008, 12:00 AM

Yehuda Diamonds sues Blue Nile in legal dispute among online jewelers

Yehuda is asking a federal court to require Blue Nile to refund customers who bought emeralds, saying Blue Nile didn’t reveal that they were artificially enhanced. Blue Nile says the suit is a response to a lawsuit it filed that will go to trial in 2009.

Online jewelry broker Yehuda Diamonds has filed a federal court suit that claims web jewelry retailer Blue Nile Inc. did not inform consumers that its emeralds were artificially enhanced. Blue Nile says the suit is a response to a lawsuit Blue Nile filed last year that is due to go to trial early in 2009.

Yehuda asks in the suit filed last month in New York City that Blue Nile be required to offer refunds to consumers who purchased emeralds without being told they were enhanced with a colorless substance. It’s a common practice among jewelers to enhance emeralds with colorless substances, such as oil or wax, to enhance the gems’ appearance, Blue Nile says. Yehuda agrees, but says such enhancement makes the gem less valuable and should be disclosed.

Yehuda notes that, since its lawsuit was filed, Blue Nile has added text to its site saying that “emeralds offered by Blue Nile may have been treated with colorless, oil, wax or resin.” "We appreciate that under legal pressure from us Blue Nile sees fit to do right by its customers," says Dror Yehuda, president of Yehuda Diamonds. "However, we plan to continue on with our case, which seeks corrective action for its past misdeeds and to make certain that Blue Nile is required to make full disclosure going forward."

Blue Nile contends the Yehuda lawsuit is in response to a suit filed last year by Blue Nile against Yehuda over Yehuda’s practice of comparing the price and appearance of Yehuda’s clarity-enhanced diamonds to those of non-enhanced stones sold by Blue Nile.

“Yehuda`s claims against Blue Nile are meritless and their action is in response to Blue Nile’s false comparative advertising case filed against Yehuda last year,” Blue Nile said in a statement. The trial of Blue Nile’s lawsuit is likely to begin early in 2009, Dror Yehuda says. Yehuda says its actions are legal.

Blue Nile is No. 48 in the Internet Retailer Top 500 Guide. Yehuda offers diamonds on its web site, but directs customers to local retail stores to complete the purchase.

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