Tennessee Retailer Sued Over Grading Reports

A new court case may test whether jewelers bear legal liability for the representations on their grading reports.

Genesis Diamonds, the Nashville, Tenn., retailer whose use of reports from EGL International made it the subject of a critical local newscast in May, has now been slapped with lawsuit over the way it uses those reports—and the plaintiff’s attorney says he expects more suits to follow. 

The complaint, filed July 22 in circuit court for Davison County, Tenn., charges the store with fraud and violations of the Tennessee Consumer Protection Act for “misrepesent[ing] the quality and characteristics of the diamonds it sells.” 

According to the suit, on March 10, plaintiff James Wells bought a diamond engagement ring at Genesis with a 2.06 ct. G VS2 center stone, as represented by its EGL International report. He paid $17,793 for the diamond, though the suit says a Genesis-supplied appraisal valued it at $27,500 based on its grading report, adding, “Throughout the sales process [Wells] was assured that the diamond’s grading…was equivalent to GIA values.” (Genesis responds that the appraisal was for both the diamond and the mounting, and says the customer paid a total of $21,293.)

The suit says that the stone’s diamond grading report was from EGL International, the Israeli lab that the suit claims “is widely known to overstate the qualities, and consistently the value, of the diamonds it grades.” A month later, the diamond received a GIA report that said it was a J SI2, worth about $16,000 on the Rapaport list.

(EGL International did not respond to a request for comment on the lawsuit. However, in response to the initial newscast, CEO Guy Benhamou denied his lab had lower standards, noted that labs often differ on grades, and argued his lab’s grading is more “practical and realistic.” His full statement can be seen here.) 

The suit also maintains that Genesis “is trafficking in what amounts to counterfeit certificates,” since EGL International reports are subject to a border ban requested by EGL USA. (The ban is 10 years old and is currently the subject of litigation.) 

The suit seeks triple the difference between what the stone was represented as and what it is actually worth (about $30,000), plus attorney fees and other damages.

Genesis attorney Eli Richardson tells JCK that the suit is “factually and legally without merit” and “Genesis Diamonds looks forward to defending itself and vindicating its business practices, which have resulted in so many happy customers in middle Tennessee over the years.”

Richardson also told a local newcast that the GIA and EGL International reports agreed on the cut and carat weight, so the only differences were in color and clarity, which are “subjective,” he said.

As far as the border ban, “It would come as significant news to jewelers all over the country that somehow there is something wrong with them being in possession of EGL International certificates,” he said.

The suit was brought by attorney Brian Manookian, who has emerged as a persistent Genesis nemesis: He once sued the store himself over a stone he said was overgraded and subsequently represented a rival jeweler who Genesis sued for defamation. (That suit was later dropped after that jeweler, George Khoury, a former Genesis employee, agree to refrain from making further comments that could be termed defamatory.) 

“I expect that there are thousands of cases against Genesis Diamonds by similarly situated plaintiffs,” Manookian says. “They can be brought by individual plaintiffs or in a class action.” 

He expects to file another similar suit against Genesis in two weeks, he adds.

 

JCK News Director