Sotheby’s could be responsible for $4 million in missing diamonds, judge says

New York
CNN Business

Be careful what you sign and read the fine print. It’s just one lesson from a convoluted lawsuit involving Sotheby’s and 45 yellow diamonds.

Sotheby’s could be responsible for $4 million in missing diamonds, a state appeals court ruled this month, after the auction house allegedly turned them over to a person a lawsuit calls ‘a stranger’ “.

M&L Financial has filed a lawsuit alleging it gave the diamonds to Sotheby’s for appraisal in April 2019 and was considering a future shipment. A few months later, according to M&L, Sotheby’s told the company that it had given the diamonds to an agent of the company who had pledged the stones to M&L as loan security. The diamonds have since disappeared.

The diamonds were owned by Jadelle Jewelry and Diamonds of Beverly Hills, owned by Jona Rechnitz, a well-known political fundraiser in New York and Hollywood celebrity circles. Jadelle has dressed several celebrities including Kim Kardashian, who has often been photographed wearing the company’s pieces

According to the lawsuit, Rechnitz gave the stones to M&L because he owed the company a “substantial debt.” While Sotheby’s was in possession of the diamonds, someone claiming to be an agent for Jadelle showed up at Sotheby’s to collect the jewelry – after Rechnitz alerted the auctioneer, the agent was arriving, according to Sotheby’s.

M&L sued Sotheby’s in 2020, arguing the gems should never have been given to an agent of Jadelle. Rechnitz had recommended Sotheby’s, M&L claimed, adding that he later found out Rechnitz was friends with the auctioneer’s jewelry specialist, Quig Bruning.

Initially, a lower court found that because Jadelle was listed as a co-shipper with M&L Financial on the contract, Sotheby’s was correct to release the goods to Jadelle’s agent.

But on July 14, the California State Court of Appeals disagreed and allowed M&L to go further in a breach of contract litigation against Sotheby’s.

It all depends on the language of the contract, according to the decision. Bruning, the head of Sotheby’s, wrote “Jadelle Jewelry + M&L Financial Inc.” in the “Sender’s name” space.

M&L said it verbally protested that the wording was inaccurate and that only the financial company should have been listed, but signed the document anyway. Sotheby’s disputes that this question was ever raised.

The Court of Appeals, pointing to some “fine print” on the back of the document, ruled this month that “M&L gave diamonds to [Sotheby’s]Told [the Sotheby’s specialist] they belonged to M&L, and left them at Sotheby’s for appraisal in anticipation of a sale on consignment.

He continued: “There was no agreement yet that Sotheby’s would definitively auction the diamonds for M&L, but a potential auction was the purpose of Sotheby’s involvement. Sotheby’s broke this agreement by giving the diamonds to [a] foreign.”

A Sotheby’s spokesperson pushed back against this framing, telling CNN Business, “The person who recovered the property was an authorized agent of Jadelle. Shippers routinely ask Sotheby’s to hand over to an agent and here on pick up the agent provided the necessary ID as required.

In a statement, Sotheby’s also said it “considers the allegations in the complaint to be baseless and riddled with untruths and distortions. We will continue to vigorously defend this in court.

Jadelle’s phone number has been disconnected and her website no longer exists; Rechnitz could not be reached for comment. M+L Financial also could not be reached for comment.

Sarah C. Figueiredo