Thirteen years after the diamond was first reported stolen, the Goldberg family has won title to it
On April 21, the U.S. Second Circuit Court of Appeals handed William Goldberg Diamond Corp. (WGDC) an unequivocal victory in its attempt to recover title to a pilfered 7.35 ct. diamond.
The decision fully reverses an initial defeat in November 2014 for the company in New York federal court and directs the lower court to rule in Goldberg’s favor on summary judgment.
The diamond was first reported lost in 2003, when the Goldberg company consigned the stone—which then weighed 7.44 cts.—to celebrity stylist Derek Khan for use in fashion shoots. Under the agreement, Khan was authorized to sell the diamond only if the owner approved the sale. When the diamond wasn’t returned, the Goldberg company filed a police report, hired an investigator, and notified the Gemological Institute of America. According to the court opinion, Khan was subsequently convicted of theft.
The stone was pawned and recut from 7.44 cts. to 7.35 cts. Later that year, a local jeweler took possession of it and sold it to a customer for $175,000. It was eventually bequeathed to New Jersey resident Suzanne Zaretsky, who sent it to the GIA.
The GIA flagged the diamond as stolen and has not returned the diamond to Zaretsky pending the outcome of the dispute.
Finding in Zaretsky’s favor, the lower court ruled that Khan could be considered a merchant that could pass title to the diamond, using language that defines a merchant as someone who “deals in goods of that kind.” At the time, Goldberg’s lawyer said the ruling could put an “extraordinary burden” on consignors in the future.
In reversing the decision, the appeals court argued there was no evidence that Khan regularly sold diamonds. It also ruled that Khan had no “voidable title” to the diamond.
“It clear from the record that WGDC never intended for Khan to become the owner of the diamond,” said the appeals court’s opinion, attributed by Judge Robert Sack. “Under the express terms of the Consignment Agreement, Khan ‘acquire[d] no right or authority to sell, pledge, hypothecate or otherwise dispose of the merchandise, or any part thereof.’ ”
In a statement, Eve Goldberg, WGDC vice president, said it was unfortunate that recovering the diamond spurred a lengthy and expensive legal battle between her company and the Zaretskys, all of whom were innocent victims.
Zaretsky’s lawyer did not respond to a request for comment at press time.