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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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