update on Enchanted Diamonds-Joshua Niamehr

[MollyMalone]

Because of the COVID-19 pandemic, the courts and law firms in New York were largely "on pause" (except for emergency/super urgent matters) after mid-March 2020. But there has been some incremental activity in the cases involving the now defunct Enchanted Diamonds (Online Diamonds International) Corp.) and its president, Joshua Niamehr. So for those interested in hearing what's happened since my January 2020 posts on the multi-page WARNING: Enchanted Diamonds Scam! Buyers Beware! thread --

WARNING! - Enchanted Diamonds Scam! Buyers Beware!

It’s an interesting legal conundrum. My naive thought would be that if ED hasn’t paid for diamonds in the inventory or had entered into a purchase agreement with a buyer and money paid for any diamonds in the inventory, then ED doesn’t have “clear title” to the diamonds that are to be auctioned...

www.pricescope.com

-- here's what I've been able to ascertain.

Re the US Bankruptcy Court proceeding, Matter of Online Diamonds International d/b/a/ Enchanted Diamonds (Case # 19−12042)

• This has been moving at a glacial pace (or maybe corporate Chapter 7 bankruptcy proceedings usually don't move relatively quickly & I've been blissfully unaware of that). Several months after the auction house filed its report of the sale of what little inventory was produced -- see my last post @#445 in the prior thread -- all known creditors were given a final deadline of July 6, 2020, in which to file their proof of claim, if they had not already done so. Since then, the bankruptcy judge has continued to issue subpoenas directing various financial institutions, Shopify, and Online Diamonds' accountant to produce all pertinent records they have.

Re Claussen v. Online Diamonds International & Joshua Niamehr (NY County Supreme Court Index No. 0653615/2019) -- this is the lawsuit initiated in New York County (Manhattan) Supreme Court on behalf of one of the ED victims by Peter Cane, Esq., the lawyer reportedly hired by Rare Carat's CEO.

• The lawsuit against Online Diamonds is stayed because of the Chapter 7 bankruptcy proceeding. On January 6, 2021, the court issued a decision and order that essentially denied Niamehr's motion to dismiss the action against him personally, but the court agreed with Niamehr's attorney that arbitration was the proper recourse for Mr. Claussen to pursue. The judge found that the provision for arbitration in lieu of litigation -- part of the Terms of Use on Enchanted Diamonds' website -- "meets the key aspects of being reasonably conspicuous by virtue of the format and design of the Order Summary page, and [Mr. Claussen] was on inquiry notice as to the terms of service, including the arbitration clause."
• There were a couple of reports posted here on from Enchanted Diamonds customers that a class action lawsuit was contemplated - see, e.g., posts ## 159 and 366 in the previous thread. But a renewed search of all cases filed in NY state courts for the past 2 years shows that no class action was filed. Mr. Claussen's lawsuit is the only one filed on behalf of any Enchanted Diamonds customer.

Re: Libertas Funding LLC v. Online Diamonds International & Joshua Niamehr (Nassau County Supreme Court Index No. 0608770/2019)
Nothing of any real interest; the lawyers are bickering. Libertas filed a motion asking the court to grant summary judgment (without a trial) in its favor on the ground that Niamehr hasn't turned over relevant records; his lawyer is claiming that Niamehr can't produce anything more because he'd previously given the records-documents to the federal Bankruptcy court. Looks like the judge will now have to step in to resolve this issue.

Here's Niamehr's current, nearly anonymous, and carefully curated LinkedIn page:

https://www.linkedin.com/in/jniame

• Notice that he describes himself as having been Co-Founder of "ODIC" (instead of Enchanted Diamonds and/or Online Diamonds International Corp.), where he

"Directed and operated direct to consumer engagement ring company. Launched proprietary algorithms to rank diamond cut and sparkle. Delivered over thousands of custom-designed engagement rings over 5 year period."​

• And did you know that he "love(s) being held accountable for project life cycles, growth and strategic plans?
  

 

[Garry H (Cut Nut)]

Thanks MollyM,
So if I followed your post accurately.

As I recollect Rare Carat promoted the idea that they were acting on behalf of all the people - the 'victims'.
Or was it only the people they directed to Enchanted Diamonds to make a purchase?

In this statement from June 21, 2019 by ROB BATES in JCK:



So how come there is only one person - a realestate agent from Dallas - and not a class action?

 

[Karl_K]

So how come there is only one person - a realestate agent from Dallas - and not a class action?

In order to get to a class action suit you have to get past the arbitration clause which the judge ruled was valid and applicable so that didn't/won't happen.
MM can correct me if I'm wrong but im pretty sure thats how it works.

 

[MollyMalone]

Thanks MollyM,
So if I followed your post accurately.

As I recollect Rare Carat promoted the idea that they were acting on behalf of all the people - the 'victims'.
Or was it only the people they directed to Enchanted Diamonds to make a purchase?

In this statement from June 21, 2019 by ROB BATES in JCK:



So how come there is only one person - a real estate agent from Dallas - and not a class action?

In order to get to a class action suit you have to get past the arbitration clause which the judge ruled was valid and applicable so that didn't/won't happen.
MM can correct me if I'm wrong but im pretty sure thats how it works.

Oh my apologies, my previous post was intended as simply a "just the facts" update, but I now realize that I should have included something to explain why there's nothing eyebrow-raising about the lack of litigation in the NY state courts on behalf of those who paid Enchanted Diamonds for diamonds or jewelry never delivered. So let me do that now:

• The greatest stumbling block -- regardless of whether litigation on behalf of ED customers could qualify under NY law for designation as a class action law suit or if there's a valid arbitration clause -- is that, as I said in back in June of 2019 (post (@#255 in the original thread), "a bankruptcy filing typically forecloses-halts civil litigation against the debtor (person or business entity) who's filed for bankruptcy."
• The purpose of that rule is to preserve the status quo, of whatever assets there were when the bankruptcy petition was filed, for the benefit of the creditors in the bankruptcy proceeding. I.e., no "outsider" can jump ahead of those properly in line to receive any of the money made available via the bankruptcy proceeding. There are some exceptions and nuances to that rule, but it's why I was always concerned people might be thinking that pursuing a civil lawsuit would be more productive than seemed realistic to me.

Peter Cane, and the law firm he retained as co-counsel because that firm specializes in bankruptcy law, are on record in the bankruptcy court as representing "Customer Creditors Group" in the bankruptcy proceeding. The "Customer Creditors Group" consists (or it did as of 2019) of 34 Enchanted Diamonds customers. See

https://www.docketbird.com/court-documents/Online-Diamonds-International-Corp-d-b-a-Enchante/Letter/nysb-1:2019-bk-12042-00014

• I have no idea how many of those 34 people found their way to Enchanted Diamonds via RareCarat. But yes, RC declared on June 16, 2019 -- before the bankruptcy petition was filed on June 20, 2019 & the fact of the filing became known -- that "Rare Carat will provide a lawyer to file a lawsuit in the State of New York on your behalf to recover your money from Enchanted Diamonds. Rare Carat will cover these expenses out of our own pockets for you. This is regardless of whether you used Rare Carat or not during your diamond search."

https://www.rarecarat.com/blog/customer-notice-regarding-new-york-retailer-enchanted-diamonds

Those lawyers have asked the bankruptcy judge to authorize them to conduct a Rule 2004 examination under oath (a/k/a deposition) of Niamehr and receive copies of sundry documents and records they can scrutinize before the Rule 2004 examination. So far as I can tell, the judge has not ruled on those applications -- and none of the creditors or the bankruptcy Trustee has conducted a full-blown Rule 2004 examination of Niamehr. Probably because the preliminaries that I think (my legal career has largely been in criminal law) routinely precede Rule 2004 examinations are still unfolding, e.g., the production of documents-records by the subpoenaed financial institutions, etc.

 

[Garry H (Cut Nut)]

It is complicated MM!

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