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Palm Offers Settlement in Defective Phone Suit

Will close retail stores to defray costs

By Martin H. Bosworth
ConsumerAffairs.com

January 26, 2008 

Palm is offering a $75 cash rebate towards replacing a defective Treo 600 and $50 towards repairing the Treo 650, if customers replaced either phone two or more times after purchase. Palm also offered a "right of repair" form for customers who have experienced difficulties with the phones, even if they did not replace them.

"Palm is entering into this settlement to avoid burdensome and costly litigation. The settlement is not an admission of wrong-doing or an indication that any law was violated," the company said in its summary of the settlement.

The lawsuit, Palza, et al. vs. Palm, Inc., claimed that Palm "made misrepresentations and concealed material information" in the sale and marketing of the phones, and that the products were "inherently defective" and "failed at unacceptably high rates."

The original lawsuit, filed in 2005, cited repeated cases of system crashes, defective headset jacks and MP3 players, and Palm replacing malfunctioning units with refurbished models that had similar problems.

Stores closing

Meanwhile, the Sunnydale, Calif., company separately announced that it would be closing all eight of its retail stores and 26 retail outlets operated in Airport Wireless retail locations in various airports by the end of 2008.

Although the company did not offer specifics in its announcement, industry insiders speculated that the closings would help the company cover the costs of the lawsuit settlement.

Palm, formerly an innovator in the personal digital assistant (PDA) and smartphone market, has struggled in recent years.

The venerable Palm operating system has faltered under pressure from competing smartphones and platforms such as Windows Mobile, the Blackberry, and most recently Apple's iPhone. Palm posted a $9.68 million loss last year, and shuttered several products in order to push development of its next operating system, based on the Linux OS.

Palm had previously settled charges brought by the FTC in 2002 that it had deceptively marketed its PDAs as being able to access the Internet and use Microsoft Office programs out of the box, when they actually required separate components to do so.

The full details of the Palza settlement, including claim forms, are available as free downloads at www.palzasettlement.com.

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