The Overgrading Saga Continues: A Lawsuit Targets the Lawyer

Texas jeweler Diamond Doctor files suit against Tennessee lawyer Brian Manookian

Since I first covered Nashville, Tenn., lawyer Brian Manookian’s ad and social media campaigns against five jewelers for allegedly selling overgraded diamonds, the dispute has only escalated.

On Feb. 3, one of the five, Dallas-based Diamond Doctor, filed suit in Eastern Texas federal court against Manookian, charging him with a variety of offenses, including extortion and violations of Racketeer Influenced and Corrupt Organizations (RICO) Act. It’s even charging trademark infringement, arguing the law firm has used Diamond Doctor’s logo in its ad campaigns. (See correction below.)

We covered some of the allegations—as well as Manookian’s response to them—in the first story. According to the suit, after running ads questioning the Diamond Doctor’s business practices, “Manookian told [Diamond Doctor president David] Blank that he would take down the [diamonddoctorlawsuit.com] website and cease attacks on Facebook if the Diamond Doctor ‘engaged’ Cummings Manookian as its outside legal counsel.”

Manookian did not respond to a request for comment, but has previously denied the charges, contending that Blank asked him to be his lawyer, at one point “begging” him for representation. He has called Blank’s assertions an attempt to distract from what he sees as the real issue here: Diamond Doctor’s sales of diamonds with EGL International reports.

Some thoughts on this:

– In response to my first post, some commenters asserted that the lawyers here are simply trying to attract plaintiffs. But a law firm looking for plaintiffs might say, “If you bought a diamond with an EGL International report at XYZ Jewelers, you may be entitled to damages.” Instead, the ads ask whether these businesses are “a scam.”

New videos that target Diamond Doctor—and sometimes Blank personally—go farther than that. “Avoid Diamond Doctor like the plague,” one reads. Another says that Diamond Doctor has “been found guilty of selling downgraded diamonds to customers at ridiculous prices.” (No case has been filed against Diamond Doctor.) Still another says, “If you’re in posession [sic] of a diamond that was accompanied by a certificate other than those released by the GIA, you could be a victim of a Diamond Doctor Fraud.” (Ironically, Manookian’s law partner, Brian Cummings, once said EGL USA had a “strong reputation.”) The lawsuit also alleges that Manookian’s firm wrote a negative review of the store on the site Ripoffreport.com that said Diamond Doctor had committed “heinous crimes.” (UPDATE: Manookian says he is not behind those videos.)

– Based on one email chain included in Diamond Doctor’s lawsuit, these ad campaigns have played a role in the settlement discussions. According to the filing, on Dec. 17, Manookian emailed Ronnie Mervis, head of Mervis Diamond Importers, another targeted jeweler (and the only one to be sued so far), with a proposed $300,000 settlement for the first two cases from three plaintiffs—Robert Ramsey, Javier Garcia, and Jennifer McMullen:

On our call yesterday discussing possible settlements of the McMullen and Ramsey matters, you requested that I pause our firm’s advertising for a brief period of time if the claims were amicably resolved. I committed to doing so as a good-faith gesture and acknowledgement of the seasonal demands of your business.…

I intend to honor my commitment, but I need to know your response in order to do so.  We have tens of thousands of the attached brochures, as well as door hangers, scheduled to begin being distributed in D.C., Maryland, and Northern Virginia beginning this weekend.

Mervis responded:

The amounts you are claiming, $200,000 and $100,000 for Ramsey and McMullen, respectively, are excessive and they have no foundation.  However we are inclined to accept as a business decision if this ends the continuous string of negative publicity you are creating.

Please confirm that if we agree to pay you the sums claimed, you will cease all activities against our name and reputation, including Facebook, Google, press, TV, fliers, door hangers, etc., immediately.

Manookian countered:

At your request, and a good faith acknowledgement of the current seasonal demands on you and your business, our firm has paused all Mervis-related advertising and suspended its website. Our law firm doing so is voluntary and is not related to any claim, controversy, settlement or resolution.… It is simply to allow you to focus on your business, and not litigation, during your busy season.

After this exchange, things seem to break down. Manookian and Mervis’ lawyer, Robert Greenberg of Friedlander Misler, got into an argument over the settlement deadline. Greenberg said he was on vacation and wanted to review the agreement after the holiday; Manookian complained Mervis was dragging its feet and threatened to file his suit.

Greenberg: “If you do file, there will be no settlement ever.”

Manookian: “I’ll be filing tomorrow. I’ll then be filing an avalanche of claims over the next year.… There won’t be another demand for my side, ever. Just lawsuits.”

Cummings: “Brian [Manookian], let’s also restart our previous Internet campaign [against Mervis] in earnest tomorrow.”

In the end, two other lawyers—Nashville attorney Mark Hammervold and Michael Schlepp of Maryland firm Joseph, Greenwald & Laake—filed the case a few weeks later.

– Another point: Manookian told me he is “sure” the five jewelers have sold “lots” of EGL International. They may have, but at this point, we are taking Manookian’s word for it. He hasn’t shown much evidence. (UPDATE: Manookian disputes the statement that he “hasn’t shown much evidence,” pointing to scans of EGL International reports he emailed to JCK.) One of the five jewelers says that, to his knowledge, he hasn’t sold a diamond with an EGL International report in the last decade. It’s not like these retailers can defend themselves in court against these charges. In four out of five cases, the jewelers haven’t been sued. They may never be. And, of course, whether selling diamonds with EGL International reports constitutes “fraud” is, for now, an unproven legal theory.

– Along those lines, as with selling EGL International reports, even if you don’t like some of the tactics being employed here, it is not clear if a court, or the Tennessee Bar Association Board of Professional Review—another venue where Blank is pressing his case—will agree, or consider them actionable. A past Diamond Doctor attempt at a restraining order was denied.

– Finally, I have talked a lot about the attorneys’ tactics here, but that is not the only issue. One longtime industry member, while calling the tactics “abhorrent,” believes the diamond lab issue was an accident waiting to happen:

This is a good wake-up call to our industry: We have to be more honest and straightforward in how we represent our product.

Whatever happens with these cases, it is clearly a risk for retailers to sell diamonds with questionable grading. Yes, some of the biggest names in the industry have played the grading game. But that may not matter. Even standard industry advertising hype like “we buy direct from the source” can get you in trouble if you don’t actually buy direct.

As I wrote in 2014 about the lessons of EGL International, often, with scandals, the blowback becomes out of proportion to the original sin. That may not be fair, but it’s an old old story.

The best protection here is, and will always be, to operate in the most ethical and above-board way. 

 

CORRECTION (2/12): Cummings Manookian is not a defendant in this case. 

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