The breach of warranty suit alleged that Iomega users who called for technical support and customer service were put on hold for excessive amounts of time and charged unfairly for those calls. Iomega and the litigants have agreed to the settlement, which a Delaware state court will hear for final approval April 3.
"I am very proud of this settlement," said Lawrence Feldman, attorney with Lawrence E. Feldman & Associates. "We're using existing law to put some sort of sanity in the computer industry to make manufacturers more responsive to the claims that they make about customer support."
An attorney representing Iomega praised the settlement as beneficial for both the consumer and the company.
"Iomega has for some time now been looking to improve the quality of its technical support," said Jim Prendergast, attorney with Hale and Dorr. "The lawsuit has made Iomega consider some new alternatives for the provision of technical support."
The breach of warranty suit is only one in a string of recent headaches for Iomega. A settlement of a class-action suit brought against the company for breaching its $50 Zip drive rebate agreement still is pending final court approval, and last week Iomega lost a key round in its ongoing battle to prevent Nomai from selling Zip-compatible disks.
Also last week, the company became the target of a class-action suit filed on behalf of stockholders who claim that two of Iomega's most senior executives issued misrepresentations and omissions on the release date of Iomega's 2GB Jaz drive. That complaint also alleges that the executives took advantage of a dramatic increase in the company's stock price by selling more than $11.5 million in Iomega shares.
Unlike many class-action suits that result in insubstantial awards for class members, the warranty settlement, if approved by the court, would result in a long list of reforms for Iomega's customer service and technical support programs.
Iomega has agreed to limit its technical support hold times for calls on the Ditto, Jaz, and Zip products to an average of ten minutes.
Iomega will expand its online technical support services by creating a "Virtual Consultant." Its Web pages will provide in-depth answers to customers' questions and include an online tutorial for using the system. Iomega will provide enough bandwidth to accommodate up to 250 concurrent users.
The company will also create a toll-free automated telephone interactive voice response system, and establish a toll-free customer support line for nontechnical questions.
Class members (consumers who bought Zip, Jaz, or Ditto drives between July 16, 1994 and September 1, 1997) who were charged for technical support calls will have their warranties extended six months either from the date of the settlement or the date of their warranty's expiration, whichever is later. Class members who never paid for a call will receive a $3 coupon toward the purchase of Iomega disks.
For two years from the date of the settlement, Iomega will waive all technical support fees for the Zip, Jaz, and Ditto drive customers for questions not answered by the company's online system. In the same period, Jaz and Ditto drive customers will get free telephone technical support for 30 days from the date of their first call, if that first call was made during the warranty period. Zip customers who bought their units between January 1, 1996 and September 1, 1997 will get $5 off technical support calls.
With the goal of ensuring consistency of information across all sources of support information, Iomega will create and maintain an authoritative database with computer problems and solutions.
Iomega will either sticker or redesign its packaging to clarify the limited nature of its warranty, to advertise the new free customer service phone number, and to clarify potential fees for customer service calls.
Iomega will pay the complainants' legal expenses of at least $650,000.
Class representative Brandon Cox, a 15-year-old Zip drive user who joined the suit after spending hours on hold for a technical support question, praised the settlement. But he said Iomega still had work to do before it won back his business.
"I'm glad Iomega is finally going to add tech support," he said. "But as it stands, Iomega hasn't helped me very much. It's a company that doesn't really care about its customers."