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Monday, February 13, 2006, 06:00 pm PT (09:00 pm ET)

Latest iPod lawsuit weighs on Apple shares

Shares of Apple Computer continued their downward spiral on Monday, this time amongst concerns over a new lawsuit charging that the colorful displays on the iPod nano are prone to scratches that render it unreadable.

The latest suit, filed by Los Angeles, Calif.-based Foundation for Taxpayer and Consumer Rights, seeks class-action status and demands Apple recall and replace all affected iPod nanos.

"This is marketed as a beautiful, sleek device, which it is, but that feature is completely gone after a few weeks of using it," Harvey Rosenfield, an attorney who filed the latest complaint, told the San Francisco Chronicle. "If Steve Jobs can pull it out of his pocket, we should be able to pull it out of our pockets without it being ruined," he said.

The 19-page complaint filed late Thursday in San Mateo County Superior Court is the latest in a string of lawsuits to hit Apple following the introduction the iPod nano less than five months ago. It's also the second suit to allege that the iPod nano is defective due to its scratch-prone display/protective coating.

In October, a disgruntled iPod nano owner filed a class-action suit against Apple, charging that the nano's screen scratches excessively during normal use. The complaint seeks that customers be refunded for their nano purchases in addition to gaining a share of the company’s profits from the players.

Apple, which acknowledged that there is a "real but minor issue" that could cause unexplainable cracks in a fraction of 1 percent of iPod nano displays, has denied the player's screen or protective coating is defective.

"The iPod nano is made with the same high-quality polycarbonate plastic as the fourth-generation iPod," Apple said in a statement last September. The company's official stance on the matter is that customers should use one of the many protective cases on the market to shield their iPod nano from scratches.

Apple shares closed at $64.71 on Monday afternoon, down $2.60 or 3.8 percent.