Have Overgrading Lawsuits Become Overkill?

Lawyer Brian Manookian’s campaigns against jewelers have raised eyebrows for their tactics

One morning in December, David Blank, owner of the Diamond Doctor, a local jeweler in Dallas, was awakened by his wife.

“You are not going to like this,” she told him. She handed him a flier that appeared on his door:

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The fliers, which Blank says were also passed out to homes in his neighborhood, are part of an aggressive campaign waged by lawyer Brian Maookian of Nashville law firm Cummings Manookian. (Manookian tells JCK that his firm had fliers handed out in the Dallas Golden Corridor, but didn’t target Blank’s house and doesn’t know where he lives. He also had fliers handed out at Dallas Cowboy football games.)

Since last year, Manookian’s firm has waged war against Diamond Doctor and four other mom-and-pop jewelers—Mervis Diamond Importers, Washington D.C.; Padis Jewelry, San Francisco; International Diamond Center, Tampa, Fla.; and Golden Nugget Jewelry in Philadelphia—over their sales of EGL International reports. (Other sites registered at his associated IP address, are dgellarlawsuit.com and solomonbrotherslawsuit.com. Another site, targeting Caribbean jewelry chain Diamonds International, was registered by his law partner, Brian Cummings.)

Manookian first appeared on the industry radar in 2014 when he repeatedly sued Nashville jeweler Genesis Diamonds over sales of EGL International (a.k.a. EGL Israel) reports. Those suits, as well as local news coverage and RapNet’s decision to ban the reports, eventually led EGL International to close. The following year, Cummings said the firm was planning suits against “nationally and regionally prominent retailers, wholesalers, and grading organizations,” adding “This may be the largest consumer action to ever hit the jewelry industry.”

For now, though, the campaign has mostly involved small suits against small retailers. Last week, attorney Michael L. Shlepp of Greenbelt, Md.-based law firm Joseph, Greenwald & Laake, along with Nashville attorney, Mark Hammervold, filed two cases on behalf of clients against Mervis Diamond Importers.

In the first, Chestertown, Md., resident Robert Ramsey bought a diamond with a 2.52 ct. diamond in 2014 with an EGL Intl. report that called it an F SI1. The GIA graded it H I1, the suit charges. In the second, two Bethesda, Md., residents, Javier Garcia and Jennifer McMullen, bought a 2.2. ct. diamond EGL Intl.-graded E SI2, which GIA called an H I2. The suits seek damages and attorney fees. In a seeming display of the hardball tactics being used here, the suits were posted online with the plaintiff’s names blacked out, but Mervis employees’ names and addresses included. (Hammervold says he plans to launch more suits against Mervis, and has “no comment” on the ads.)

Manookian says that now that EGL International has dissolved, consumers are having trouble getting their diamonds with those reports insured. This has led consumers to Google his diamondlawsuit.com site. From there, he zeroes in on jewelers that he says sold “large amounts” of these reports, he says.

Yet even some who aren’t fans of EGL International reports have been unsettled by his tactics. In a spin on standard law firm attempts to attract plaintiffs, Cummings Manookian has erected websites and placed ads on Facebook and Google aimed at the jewelers’ customers. The Facebook ads, Manookian says, generally target consumers who “like” the jewelers in question, have gotten engaged in the last five years, and are fans of the radio stations the jewelers advertise on.

Here is one:

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Here is another:

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Another said: “You may have been cheated with a fraudulent diamond”—although the product at issue is a diamond report, not the diamond.

Asked if he’s trying to hurt their business, Manookian says he doesn’t care if he is.

“They were [selling EGL International] for years and now they are finally getting called on it,” he says. “All of their competitors who have been hurt by this anti-competitive behavior are ecstatic about it. I feel strongly about this and we are really aggressive in our advocacy about it.”

(We should note that Facebook’s advertising policies says advertisers “must not use targeting options to discriminate against, harass, provoke, or disparage users.”)

Other ads have targeted the jeweler’s employees; at one point, Diamond Doctor’s store employees got Facebook messages that read: “Ask David Blank if you will be liable for fraudulent sales.”

Manookian says those notices are meant “to warn employees that this is actionable conduct, “ he said, noting the Mervis suits targeted sales associates. “We are just putting it out there, they could get sued, you have personal responsibility … It’s an aggressive tactic. I can understand why people would object to it. They don’t have to like it.”

Both Diamond Doctor and Mervis say they offer guarantees and trade-ins to unhappy customers, and say they no longer sell diamonds with EGL International reports, adding those reports only represented a small percentage of the diamonds they sold. Brian Stamey, IDC vice president, says his store hasn’t bought a diamond with an EGL International report in five years. Padis Jewelry president Steve Padis says, to his knowledge, his store hasn’t sold a diamond with an EGL International report in the last 10 years.

In a filing with a Dallas court, Blank said, “At no time has Diamond Doctor ever led any customer to believe that an EGL certified diamond was remotely similar to a GIA diamond.” On his site, Blank posted the “disclosure” he says is handed out with EGL reports, which reads: “We do not agree with the EGL grading standards.” This might let them escape liability, at least according to Manookian himself, who said in a 2014 interview that “honestly representing the quality of a good” is “not actionable.”

Manookian responds that “we would have never targeted those companies if we weren’t sure they were selling lots of EGL-I.” He adds that all the Diamond Doctor customers he’s talked to never received those forms. (Blank says he’s always included them.)

Diamond Doctor, Mervis, and IDC have all put up sites stating their case. In November, Diamond Doctor also asked a court for a temporary restraining order against Cummings Manookian’s advertising, which was denied on jurisdictional and prior restraint grounds. (Diamond Doctor later dismissed the case.)

Blank says he has filed a complaint about Cummings Manookian’s conduct with the Tennessee Bar Association Board of Professional Review, which calls what Manookian is doing a form of “extortion.” According to Blank’s filing, which he sent to JCK:

Whether direct or indirectly … Mr. Manookian and the [jeweler] have one or more direct communications. During these discussions, Mr. Manookian explains to the jeweler that the campaign can only be halted if the jeweler will agree to “engage” Cummings Manookian as its law firm. The proposed terms of the engagement have varied from jeweler to jeweler, but they are all long term engagements for substantial sums … In the case of the Diamond Doctor, Mr. Manookian’s proposed a ten year engagement at $25,000/month, for an aggregate “fee” of $3,000,000.

The complaint asserts that Manookian temporarily halted the media campaign during these discussions.

Diamond Doctor has since posted the proposed engagement agreement on its site. It flagged this paragraph:

If the client terminates the services of the firm, it shall continue to pay the firm through the full term of the agreement.

Manookian calls Blank’s claims “hyperbolic” and “absolutely false,” and tells a different tale. His response to the board, which he sent to JCK, says:

When I spoke with Mr. Blank, he immediately stated that he wanted to settle his matter with us and further retain our firm to defend him and his company in future matters. Mr. Blank then offered me “20, 25 thousand dollars a month” over “a 6 year period or a 7  year period” to represent him. This proposal came directly from Mr. Blank. I had never offered him my services, suggested such a thing, or even spoken to Mr. Blank prior to his attorneys asking that I do so.

I ultimately agreed to discuss terms of an ongoing representation of Mr. Blank, and, toward that end, I sent Mr. Blank a redacted version of a past attorney-client agreement as he had requested. … I referred him to the lawyer who drafted the agreement for our firm.

During that call, Mr. Blank’s attorney began stating that I was “an extortionist,” and that he would report me to the Board unless I agreed not to sue his client. He also stated that Mr. Blank had now successfully conflicted me out of any future cases against him. 

In reality that appears to have been the point all along.

He adds the wording on his agreement is “standard” for a lawyer on retainer; asked why he doesn’t bill by the hour, he says he has done that but doesn’t like it. At press time, the BPR does not appear to have ruled on the complaint.

Manookian does now represent Genesis, which is suing John Hardy for dropping it as an authorized dealer. (Hammervold is also counsel on that suit.)  Manookian says that he only took on Genesis after the over-grading suits were settled, and that store no longer carries EGL International reports. He also does work for Diamonds Direct, the Charlotte-based retailer that once carried EGL.

Manookian claims the jewelers are just trying to “change the subject and attack the messenger.”

“They want to erect a false narrative and it is not going to work,” he says. “They just want to make this about me.”

He does have one point that all the counter-sites and complaints have attacked him on. In March 2015, he pled guilty to one misdemeanor count of violating the Food, Drug, and Cosmetic Act for his role in Melanocorp, a now-defunct company that sold Melanotan II, a non-FDA approved—and some say harmful—injectable tanning drug. Last summer, Manookian was sentenced to one year’s probation, including nine months non-monitored house arrest.

Manookian says the Melanocorp case “has nothing to do with this.”

“They just want to fling mud at me,” he adds. “We are an aggressive litigation firm. I can’t have thin skin. If [the jewelers] want to put up stuff about the criminal charges against me, that’s public record.”

Which all brings up the question: How common are these “aggressive” tactics? I asked two other attorneys, one who is familiar with the jewelry business and one who isn’t. Both described these tactics as unusual.

“It’s not unusual to solicit members of a class,” said one. “That’s not the problem. The problem is the way he is doing it.”

Let’s say this is successful. Forget about the damage to the industry. I don’t want to live in a world where law firms regularly run social media campaigns and hand out fliers against small businesses or individuals they target, before they even sue them.

The issues with diamond labs were, and are, bad. But to me, this …

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… is worse.

This is a developing story. We hope to have more soon.

 

Update:  In a prior version of this post, JCK linked to third-parties’ websites that related to its subject matter.  Those websites demonstrated the existence of a public controversy upon which we were reporting.  The content of those websites, including the views and opinions expressed therein, are those of their authors.  Those views and opinions were not published by JCK, and JCK does not necessarily endorse the contents of the third parties’ websites.  JCK has elected to remove the links from this story.

 

JCK News Director


  • stamres

    Is there an better example why people hate lawyers ??? i do not agree with selling EGL Israel Certs BUT this is over kill by a person who has found a get rich scam.I have lost many sales to EGL Israel certs BUT i have also lost sales to overgraded GIA certs. The question is at what point is it the Jewelers responsibility to oversea the certificates issued by so called experts ?? I wonder if this lawyer before the cert suits owned his own ambulance as well. I know you can sue for anything but the courts should be used for better purpose.

  • RDWJr

    I’m grateful there are officers of the court advocating for consumers who have been or could be defrauded from EGL certifications. Jewelers who do the right thing as it relates to certification have nothing to fear.

    • Rob_Bates

      Hi RDW. Appreciate the comment. According to what Google tells me, your IP comes from Nashville. Do you have any association with the principals here? If you do, it would be great if you could disclose that. Thanks.

      • RDWJr

        I have no association with the principals in the article.

  • John Kelly

    Interesting, the bottom line is these retailers are screwing over us consumers on the order of billions-of-dollars, Martin Rapport reported as such stating clearly in his YouTube video pleading and fearful that these guys are going to cause harm to the industry by creating distrust etc, one the of the major grading labs is now gone as a result, and Rob, you actually say what the lawyers are doing is worse? I think not my friend, I think not!

    • RyanG2122

      I for one am glad that that lab is gone, they deserve to be gone, what they were doing was pure and simple intentional fraud, there is no level of incompetence that could allow someone with the proper training and equipment to overgrade a stone by 7 color grades and 4 clarity grades (the most egregious overgrading we have ever seen). We would tare up EGL certs, they arnt worth the paper they are printed on. Who really deserves to be sued are the chain stores that rely on those certs exclusively to sell diamonds by the millions to people based solely on the content of bogus “Cert”.

  • Lapidary Artist

    I’ve commented previously on this lawyers somewhat dubious conduct but this takes the cake. Chasing ambulances is sad enough but at least the end target was an insurance company not mum and dad business’. But making false and misleading allegations such as claiming EGL certificates are fraudulent or even ‘fraudulent diamonds’, publishing defamatory remarks, harassing and intimidating employees, possible extortion, bringing the legal community into disrepute, must surely amount to professional misconduct warranting show cause, not the other way round as has happened to Charles Kaplan for complaining about it. There’s something seriously wrong here.

    I might be wrong but it seems these actions have been settled without the Courts having the benefit of full argument over the issue, which has caused the matter remain unresolved and the reported behavior to fester.
    .

  • Geoffrey Beaumont

    I like knowing some lawyers shine the light on others’ wrongdoing – whether it is the auto industry, government corruption, or consumer fraud. This is not the 1960s, and the Internet and print shops can produce and distribute information better today than 50 years ago. If that means the word gets out better regarding this apparent rampant fraud, terrific!

    • Rob_Bates

      So if your business, whatever it may be, was ever accused of, in your words, “alleged fraud,” you would think it’s “terrific” for people to hand out fliers outside your place of business and contact your employees about it?

  • Steve Memferd

    Reading this article is like watching our president speak, full of misdirection, smoke and mirrors. Cleary written with a bias, then supported with the comments to prove it. Why not come right out and say: Let’s not worry about the countless people getting ripped off by these jewelers, instead let’s focus on the lawyer’s background, and the mean tactics they used to shed light on the issue. I saw the news in our area about Mervis and that’s how I found this article, quite frankly I was shocked to learn of this, but not surprised. I have heard Ronnie’s ads for years and if all of this stuff is proven true, then there is no amount of “yea butts” that will make any of it ok, karma will come to get him. I will wait and see the results of the lawsuits, then I’ll decide who’s side I’m on, based on the facts and the reality of the situation, not how it makes me “feel” or what I “think”.

    • Rob_Bates

      Hi Steve. Sure doesn’t seem like you’re waiting for the facts to come in What local news did you see this on?

      I should say that when I searched for your name online, I could only find a YouTube account that posted a video of a case that Brian Manookian was involved in. …. https://www.youtube.com/channel/UCg0drFE8XdPMaVNuj6x_djA

      We are getting a lot of people with no other commenting history coming here and all weighing on the same side, which also happened with the John Hardy article. I have no idea what the story is but, as a general rule, we prefer people that have a relation to the matter being discussed ID themselves. Thanks.

    • RyanG2122

      On Point! There are “Certs” in this industry arent worth the paper they are printed on. If its not GIA or AGS its highly suspect until proven otherwise.

  • Kim Martin

    This is a straight-forward issue.  The diamond industry has been plagued by retailers knowingly misrepresenting diamonds via the use of EGL certificates when the retailer knows and EGL certificate uses GIA terminology but overgrades diamonds, and the unknowing and duped consumer thinks they are getting some type of “deal” when they are actually overpaying.  This is no different than a car dealer rolling back the odometers on vehicles it sells – only the seller knows that the item being sold does not have the actual qualities and value the consumer is led to believe.  Fraud is wrong.  Profiting off fraud is wrong.  Lawyers getting the word out and helping the victims is much needed, including apparently after the diamond industry and some of its retailers have run this scam for years.

  • 2Smart

    As a longtime retailer, our store has only use GIA and AGS diamond grading reports. I often pointed out the different standards used by other labs to my clients so they could understand the seeming disparity in pricing of “similar” diamonds.
    But two points here.
    1. Years ago I read about a jeweler who was sued over a GIA report on a large diamond. It was sold with a report that graded it as a D color, but years later when the purchaser decided to sell the stone and had it regraded by GIA it came back as an E. Due to the unusual size of the stone that made a substantial difference in the value of the diamond and the court found against the jeweler. The reasoning here (which I took to heart) was that diamond grading, even by GIA, is not an exact science. If you read GIA’s disclaimer, you know that the grading is the “opinion” of the graders using standards, equipment, and technology appropriate at the time of the report. The grading could be different at another time with better equipment, etc. There is no absolute guarantee from GIA and they issue “Diamond Grading Reports” not “certificates” (which would be certified accurate). The court found against the jeweler for not explaining this difference to the customer.
    2. With EGL labs as well as others, I always understood that their standards were different than GIA or AGS – EGL even stated that. What always bothered me was that they used the same terminology. So this is where you can easily end up misleading the consumer. These jewelers will probably be liable if they just presented the reports without explaining the difference.
    That said, I find this attorney’s tactics noxious and unfair. I have no trouble believing the “blackmail” part of the story. I have seen attorneys use similar approaches on other issues just as a way to extort money from business owners. And while I am happy to see the grading industry clean up its act and am always in favor of exposing bad actors in our industry, as with most issues there are a number of underlying details that may not be so clear, or may just not be heard by those who love to be indignant.
    Let’s hope no one who has tried to act in good faith is permanently damaged.

  • RyanG2122

    I for one am glad that that lab is gone, they deserve to be gone, what they were doing was pure and simple intentional fraud, there is no level of incompetence that could allow someone with the proper training and equipment to overgrade a stone by 7 color grades and 4 clarity grades (the most egregious overgrading we have ever seen). We would tare up EGL certs, they arnt worth the paper they are printed on. Who really deserves to be sued are the chain stores that rely on those certs exclusively to sell diamonds by the millions to people based solely on the content of a bogus “Cert”. Do I agree with the lawyer’s tactics? No, talk about shady, but this is a problem that this industry needs to address, a proverbial elephant in the room.

  • BizWhiz

    Isn’t Manookian doing a public service, despite the “tacky” ads ? Isn’t the important thing that the customers who were screwed by shady diamond dealers be fairly compensated ? If not for the likes of Manookian and Cummings, how would someone know they got ripped off with an EGL rated diamond ?

    The means justifies the ends in the case, absolutely. Aren’t you glad a bogus firm like EGL is gone ? Vultures like that won’t be run out of town with nice talk and please and thank you’s. It takes tough actions to get rid of shysters, and time, money and risk to find the people who’ve gotten ripped off.

    If you had unknowingly just bought an overpriced EGL diamond, wouldn’t you be glad to see an ad by Cummings/Manookian ? Would you care how the ad looked ? Be thankful there’s watchdogs around like Cummings/Manookian.

  • Robyn Hawk

    Really Interesting article Rob, the comments are almost as interesting….
    These legal offices must have quite the Payroll to solicit this many favorable comments. My personal thought is that when you bring down a local business with tactics that are this despicable the actions diminish the entire community.
    I also believe, along with the gentleman below that Karma will out…we will all know soon enough where the fault lies.
    When we know better we do better….greed however never learns, these lawyers will soon move on to another Industry….in another location. Hopefully it’s isn’t yours.

  • BizWhiz

    Dear Robbie,

    You’d rather get ripped off for thousands of dollars by a slick jeweler driving a Ferrari, than having to view an aggressive ad by a lawyer who’s trying to protect & educate diamond customers ? I have a 3 carat Elizabeth Taylor like ring for only $3000 if you act today !