Figueroa v. Sharper Image Corp. was a federal class action brought on behalf of roughly 3.2 million buyers of the Ionic Breeze air purifier, in which a Miami federal judge rejected a proposed coupon settlement as “patently unfair” under the Class Action Fairness Act. The company filed for Chapter 11 bankruptcy months later, and the class never received a court-approved settlement in the case.
What the Lawsuit Claimed
Manuel Figueroa and Dixie M. Garner filed the case (No. 05-21251) in the U.S. District Court for the Southern District of Florida before Judge Cecilia M. Altonaga.1CaseMine. Figueroa v. Sharper Image Corp., Case No. 05-21251 Sharper Image had marketed the Ionic Breeze as an ionizing air purifier that could clean indoor air, remove dust and pollen, and help allergy and asthma sufferers.2NBC News. Sharper Image Settles Air Purifier Suit
The plaintiffs alleged the device did not work as advertised and exposed users to hazardous ozone at levels exceeding 50 parts per billion, a fact the company had not disclosed.3GovInfo. Figueroa v. Sharper Image Corp., Order The complaint pleaded breach of contract and warranty, unjust enrichment, violations of the Magnuson-Moss Warranty Act, false advertising, unfair competition, and consumer protection violations under the laws of every U.S. state.1CaseMine. Figueroa v. Sharper Image Corp., Case No. 05-21251 The class covered consumers who bought an Ionic Breeze in the United States between May 6, 1999, and January 2007.2NBC News. Sharper Image Settles Air Purifier Suit A Consumer Reports review had already labeled the product “ineffective,” and sales had fallen sharply.4CBS News. Sharper Image Settles Air Purifier Suit
What the Proposed Settlement Offered
In January 2007, Sharper Image and the plaintiffs announced a deal. Each class member would receive a $19 merchandise credit redeemable only at Sharper Image stores, plus the option to buy a grill attachment called the “OzoneGuard” for $7. The company would also modify its advertising and pay up to $1.875 million in attorneys’ fees.4CBS News. Sharper Image Settles Air Purifier Suit Sharper Image denied wrongdoing but said the settlement was in the interests of shareholders and customers.2NBC News. Sharper Image Settles Air Purifier Suit
After objections, the parties revised the agreement. Later versions removed the one-credit-per-household cap, allowed one $19 credit per unit for products originally priced above $100, permitted credits to be combined, and offered the OzoneGuard attachment free to claimants whose devices lacked one.3GovInfo. Figueroa v. Sharper Image Corp., Order
Why the Judge Rejected the Deal
On October 11, 2007, Judge Altonaga issued a 61-page ruling rejecting the settlement, which by then had been revised a third time.5CAFA Law Blog. Figueroa v. Sharper Image Corp. Settlement Decision6vLex. Figueroa v. Sharper Image, No. 05-21251-CIV The court’s core objections were substantive.
The $19 coupon was inadequate on its face. A product that originally sold for roughly $300 was being answered with a credit worth a fraction of the price, and the credit could only be spent on more Sharper Image merchandise. In practical terms, the deal steered future sales back to the defendant instead of compensating the people it allegedly harmed.5CAFA Law Blog. Figueroa v. Sharper Image Corp. Settlement Decision
The settlement also failed to make Sharper Image give up any of the profits it had allegedly earned through misleading advertising, a point objectors pressed and the court accepted.7Public Justice. Figueroa v. Sharper Image
Judge Altonaga found the negotiations had been conducted from a position of weakness. The deal was struck before class certification and before meaningful discovery into the merits, and Sharper Image had used the threat of a litigation stay as leverage. Because the plaintiffs’ claims looked strong on the merits, the court concluded the “small risk of receiving nothing was worth taking” rather than accepting a poor deal.5CAFA Law Blog. Figueroa v. Sharper Image Corp. Settlement Decision
Thirty-six state attorneys general filed objections arguing that coupon-only settlements do not adequately compensate consumers and force them to keep doing business with the company that harmed them.5CAFA Law Blog. Figueroa v. Sharper Image Corp. Settlement Decision The judge also rejected the nearly $2 million in attorneys’ fees that class counsel had requested, pointing to the imbalance between what the lawyers would receive and the minimal relief for millions of consumers. The ruling applied the Class Action Fairness Act, which Congress passed in part to curb coupon-only settlements.8Law.com. Miami Federal Judge Rejects Sharper Image Settlement
What Happened to Consumers After
Before a new settlement could be negotiated, Sharper Image filed for Chapter 11 bankruptcy on February 19, 2008, in the U.S. Bankruptcy Court for the District of Delaware (Case No. 08-10322).9Cole Schotz. Gift Cards and Their Disparate Treatment in Chapter 11 Cases The company was sold to a consortium of investors for $49 million and reorganized as TSIC Inc.10Yahoo Finance. Sharper Image Wants to Repay Gift Card Holders
Ionic Breeze buyers in the Figueroa class never received a court-approved settlement. The bankruptcy did produce a separate recovery for holders of Sharper Image gift cards, whom the bankruptcy court treated as priority claimants and who could recover the full value of their cards by producing a copy of the card.9Cole Schotz. Gift Cards and Their Disparate Treatment in Chapter 11 Cases That gift card recovery was a separate proceeding and was not compensation for the air purifier claims.
The Figueroa ruling has since been cited as a leading example of a federal judge using the Class Action Fairness Act to refuse a coupon-only deal, one in which class counsel stood to collect millions while consumers received credits worth a fraction of the purchase price, redeemable only with the defendant.