Appeals court rules new trial in discount diamond case

By Angela Underwood | Feb 7, 2018

MIAMI -- The Florida appeals court will give a cruise ship passenger the opportunity to argue why a jewelry reseller should honor a contract to sell a multi-million dollar diamond for a fraction of its price, despite the discount pricing resulting from a misreading of the quoted price by sales staff.

According to panel of the Third District Court of Appeals in Florida, the lower court's misunderstanding of what constitute a "unilateral mistake" means the jury instructions prior to the jewelry shop's favorable ruling were invalid.

The issues stemmed from a purchase of a 20-carat diamond appellant Thomas DePrince made at a jewelry store, operated by Starboard Services Inc., while aboard a vacation cruise. Though the shop did not have such a diamond, it coordinated with an on-shore jewelry shop to facilitate DePrince's request, which send a quote sheet to the ship's jewelry store, resulting in a purchase contract based on a total price of $235,000.

That price, court documents state, was later discovered to be the price per-carat amount. After discovering the mistake, Starboard refunded DePrince's money and cancelled the transaction, at which point he sued for breach of contract.

Beginning the appeal opinion with a 1932 Paramount Pictures movie reference to "Night After Night,” Judge Robert Luck, who author the majority opinion of the court, used the compliment “Goodness, what a lovely diamond,” given to actress Mae West to open the opinion. 

“Goodness, too, had nothing to do with how Thomas DePrince bought his 20-carat diamond,” Luck wrote in the opinion. “Through a comedy of errors, and an e-mail miscommunication, a cruise line jewelry shop sold the 20-carat diamond to DePrince for one-twentieth of its retail value.”

Among its arguments, Starboard asserted that DePrince committed fraudulent inducement, as he was aware the 15- to 20-carat diamond was being sold for millions less than it should be yet did not say anything. Starboard also argued its right to back out of the contract based on the an argument of a "unilateral mistake." The lower court agreed with Starboard, prompting the latest appeal.

Explaining the court's reversal, Luck discussed how the panel and trial court were mandated to apply the “four-prong test to establish unilateral mistake,” which includes that an error was made by the party seeking to profit from the fault, there was no neglect on the party looking for a return to the status quo, rejection of withdrawal from the agreement would be unfair.

“The jury found that Starboard should be excused from performing under the contract because it committed a unilateral mistake and was fraudulently induced by DePrince,” Luck wrote in the appeal, adding the trial court then denied DePrince’s motion for fixed verdict on the affirmative defenses.

In the standard of review, the panel explained that since DePrince appealed the fixed verdict, jury instructions and evidence submitted, the Third District Court of Appeal had several standards of review before them. As for the fixed verdict motion, Luck said the trial court should have directed a verdict on Starboard’s “fraudulent inducement affirmative defense” and was wrong not to do so since minus material representation neither party was mandated to reveal facts the other party could have found through due diligence.

“Because the one fact Starboard relies on was not a half-truth that would trigger a duty to tell the whole-truth, DePrince did not owe a duty to disclose what he knew about the true value of the diamond and he did not fraudulently induce Starboard into entering the sales agreement,” Luck wrote in the appeal.

As for jury instructions based on the “four-prong test to establish,” the Third District Court of Appeal agreed the trial court not follow the delivery of the prongs, specifically the use of the words "some degree negligence,” which inevitably lightened Starboard’s burden.

“The trial court’s instruction allowed the jury to find that Starboard could be a little or somewhat negligent, just not inexcusably negligent,” Luck wrote in the appeal. “The trial court, in other words, made it so Starboard could have been negligent about the price for the diamond, and still be entitled to rescind the contract.”

Evidentiary issues in question, included DePrince being banned from bringing up the invoice that language that special mail orders were nonrefundable, his inability to elicit testimony that the diamond’s retail price marked up by $2 million by Starboard from its original suppliers price and Starboard’s allowance to ask DePrince if he knew of his lawful responsibility to inform them about the true value of the diamond, all established the right to a new trial, according to Luck.

Judge Edwin A. Scales III dissented, noting he did not believe the trial court abused its discretion, since “the record in this case indicates the trial court was keenly aware of [the initial DePrince ruling], and strived to comply with it,” according to the appeal.

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