Lost Movado Watch!

I took my Movado watch in to Kay Jewelers on 34th Street in NYC for repair in July '11.  After one month of not hearing anything back I contacted the store and was told the manager was off and I should call back.  This went on for awhile.  To make a long story short in late September I was told the watch had been lost or stolen on the way to repair and for me to be patient while they tried to track it down.  Another month went by and they finally stated I could come in a they would let me select another watch.  The watches they offered me were not comparable to the watch they lost. The one I choose which was comparable they stated I would be responsible for paying the $700.00 difference the original cost of my watch and the watch I selected. It has been 5 months since they lost my watch and I felt the very least they could do was work with me (a good customer) on a comprable watch.  Why should I have to pay additional money when they lost the watch when it was in their care.  When I stated this was unaccpetable they said they would issue a store credit of $132.00 towards the $700.00.  This too was unacceptable considering especially considering the treatment we had received to date relevant customer service.  My husband went to the store to in person to try and bring closure to the issue and was not able to get any resolution and for his trouble the store manager called the police to have him arrested even though he was only inquiring about getting our money back and not wanting a store credit.  When you receive bad service from any retailer and choose not to do business with them why would they think you would want to purchase another product from them.  I didn't lose my Movado watch...Kay Jewelers lost my Movado watch.  I shouldn't have to say this but my husband is African American the store manager was Caucasian and I can't help but think this was also another reason the police were called.  My husband happens to be a senior executive at a major academic medical institution, a former professional football player and certainly knows how to conduct himself professionally.  Because we would not accept their store credit and the general manager said there was nothing he could do because of "Kay Jeweler policy" we are now left with no choice but to write complaint letters and litigate.  What a sad state of affairs for a supposedly nationally recognized professional organization.