Iomega Corp. faces a class action lawsuit filed by a New York attorney unhappy about a problem-riddled rebate promotion for its Zip computer storage drive.
Albert A. Natoli filed the lawsuit in state court in Delaware in March, where Iomega is registered as a company. The case has received little attention outside of the Internet, where it is mentioned on several anti-Iomega Web pages.CEO Kim Edwards made no mention of it in April during the company's annual meeting in Salt Lake City, though he apologized profusely for the flawed program.
"All we can comment on is there is a lawsuit pending, the subject is rebate payments and we are defending the lawsuit," said Susan Stillings, vice president of investor relations at Iomega.
Natoli told the Deseret News he decided to sue the company after he bought a Zip drive and had problems getting a rebate.
"I asked friends if they had trouble and found an incredible number had," Natoli said. "Based on that I decided to look into it further and found it was a widespread problem."
The suit asks the court to require Iomega to pay the rebates and also asks for unspecified damages. Since filing the case, Natoli has received his own rebate.
"We are discussing ways to resolve this at this point and hoping it will be able to come to a quick resolution," he said. "If we can get something done quickly that is fair for everybody, that will be great."
Iomega ran an initial rebate offer on Zip drives and disks from July 1996 through September 1996, and a second promotion that ended in March. The first offer apparently attracted far more interest than the company anticipated.
To make matters worse, a firm the company hired to process the requests experienced a variety of problems, including losing many rebates.
"The intent was to provide a great deal for customers who wanted to buy Zip drives," said Cory Maloy, Iomega spokesman. "It wasn't the intent to hassle them and make them jump through hoops."
Edwards said in April that the company had resolved processing problems and fully intended to pay all qualified rebate requests.
"We've had to evaluate requests on a case-by-case basis," Maloy said. "My understanding is that the majority of people have been paid."
The company even sent some customers a complimentary Zip disk along with belated rebate checks as a goodwill gesture.
But comments on Web sites indicate some people are still waiting and that others only received payments in June, after waiting as long as 10 months for checks.
Natoli said Iomega still has many unhappy customers. He said more than 800 people contacted him about joining the suit when it was first filed; of that number, roughly 10 percent have since received rebates.
"There are people who filed all their papers last year and still don't have their rebate at all," Natoli said. He's also been approached by consumers displeased with the company's Jaz products and its customer support services about a possible class action lawsuit.
"I can't say I've seen enough to draw any conclusions," Natoli said.
Iomega disclosed in April that in-house testing uncovered a flaw that could affect as many as 75,000 disks made at its Penang, Malaysia, plant. It offered to replace the disks free. Maloy said that return rates on Jaz drives, which provide a gigabyte of storage on a single disk, aren't above normal.
The bad experience with the company's initial rebate program hasn't deterred its enthusiasm for such promotions. Iomega currently is offering four separate rebates on its Ditto and Zip products.
"We've been working hard to make sure that kind of stuff doesn't happen again," Maloy said.