Have Overgrading Lawsuits Become Overkill?
Lawyer Brian Manookian's campaigns against jewelers have raised eyebrows for their tactics
Rob Bates | January 29, 2016
"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:
The fliers, which Blank says were also passed out to homes in his neighborhood, are part of an aggressive campaign waged by lawyer Brian Manookian 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. Schlepp 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’ name 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:
Here is another:
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, which can be seen here, here, and here. 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, which can be seen here. 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 …
… is worse.
This is a developing story. We hope to have more soon."
Lots of sublinks to more info in this article here:
http://www.jckonline.com/blogs/cutting- ... -306540353
