Clarity-Enhanced Diamond Yields Lawsuit

 

July 1998

at press time

Clarity-Enhanced Diamond Yields Lawsuit

Outcome could have wide-reaching effects on the sale of treated gems

A lawsuit recently filed in a state court (unnamed to protect the litigants) is likely to have important implications for the jewelry industry. The plaintiff, a retail jeweler, alleges he bought a 3.8-ct. diamond from another jeweler who sells jewelry to consumers and to the trade.

The plaintiff later resold the diamond to a customer. Four months later, says the plaintiff, the customer returned with the diamond after having it appraised. The appraisal indicated the diamond had been clarity enhanced through fracture filling.

The plaintiff returned the customer's money and then tried to return the diamond to the defendant. The lawsuit was filed when the defendant refused to accept the diamond and return the purchase price.

The Plaintiff's Suit
The plaintiff's allegations give rise to several legal claims. They are:

  • Fraudulent misrepresentation. To succeed on this legal theory, the plaintiff has to prove the defendant knowingly misrepresented the diamond's quality, a material fact, and that the plaintiff reasonably relied upon the defendant's representation of the diamond.
  • Violation of state consumer protection act. This claim is made because it provides for a wider range of damages than other laws. Also, there is no need to prove the jeweler/defendant who sold the diamond intentionally misrepresented its quality.
  • Breach of warranty. Under the law, many statements made about a product are deemed warranties or promises even though they are never discussed in such terms. The plaintiff would have to prove the defendant made affirmative statements that created express warranties or implied warranties about the fitness of the diamond and that these statements formed the basis of the bargain.
  • Negligent misrepresentation. This legal theory is used because the plaintiff would have to prove only that the defendant failed to use reasonable care in obtaining or communicating information about the diamond. It's often easier to prove a defendant should have known something and disclosed it than to prove he or she actually did know and concealed it.

The diamond was bought for $10,000 and resold for $14,000. The plaintiff is seeking $14,000 in compensatory damages, $50,000 in punitive damages, costs of suit, attorney fees and pre- and post-judgment interest on any award.

The Defendant's Response
The defendant's answer to the lawsuit portrays the facts differently and raises two primary defenses:

  • The diamond was not treated in any way before the plaintiff bought it. This would be an absolute defense if believed by the jury. If the diamond was enhanced after being sold to the plaintiff or after being sold to the customer, the defendant would have no liability. This is a factual rather than a legal defense and may come down to a question of the credibility of the witnesses who testify. The uncontested fact the customer possessed the diamond for several months before the enhancement was discovered may be important.
  • The other defense rests on the defendant's claim the plaintiff had several days to inspect the diamond before buying it. The legal theory is that even if the diamond was enhanced and the defendant did not disclose that fact, the plaintiff is barred from making these claims because he accepted the diamond after having reasonable time to inspect it.

The defendant seeks to have all claims dismissed and has asked the court to award his attorney fees, costs of suit and other damages the court considers appropriate.

Ongoing Process
A crucial issue in the case is when and by whom the diamond was enhanced. Experts who will testify on this issue have not yet been identified. At press time, the plaintiff's attorneys were preparing to amend the complaint to add other parties. Discovery, the formal process of obtaining information and documents from the opposing side, is ongoing.

Professional Jeweler will follow this case as it develops.

– by William H. Donahue Jr., Esq.






Copyright © 1998 by Bond Communications.


 

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