• January 2, 2015

jean-michel_basquiat_icon_6_d5858832hUpdate (January 2, 2015): U.S. District Court Judge Joan N. Ericksen began her opinion granting Defendant Gem Shopping Network’s motion for summary judgment by noting a claim in the case that Defendant told Plaintiff Ann Klinge about someone who sold “‘a stone here and a stone there’ to ‘stay afloat’.”

But then, on New Year’s Eve, the District Court torpodoe’d the plaintiff’s case, as predicted, below (order linked). The keys to the Court’s grant of Defendant’s motion for summary judgment were Plaintiff’s failure to come up with any evidence of Defendant’s knowledge of the falsity of statements that Defendant made and the fact that many of the alleged false statements were “non-actionable puffery” (that a stone was “top gem quality” or “world class,” for example).

Original post (December 15, 2014): If you sold bogus cancer cures for even a mere $10-a-pop, you are a sleaze and we all hope that the government will root you out and prosecute you. If you sold the image to the upper left (Icon 6 by Jean Michel Basquiat, painted in 1982) at auction for $2,201,453 earlier last month, you are the renowned Christie’s Auction House in Paris. Congratulations!

The difference, of course, is that sellers of bogus cancer cures prey on desperate buyers who are are being deceived. Christie’s, on the other hand, is simply getting the highest price it can get for an object that some obviously regard as extremely valuable (though most of us do not).259px-Sapphire_Gem

The extremes of when the government should step in and when the government should leave markets alone are uncontroversial and obvious to most of us. Let the rich throw their money around however they please. Prevent fraudsters from tricking people. These are easy calls (to most of us (exceptions: extreme libertarians or Marxists)).

But what about the vast swath of commercial transactions between the extremes? The kinds that we are all involved in every day. What about the Gem Shopping Network (“GSN”)?

I read GSN’s argument in support of its motion for summary judgment in the case brought against it by Plaintiff Ann Klinge as relying to some degree on legalistic prerequisites of Minnesota consumer fraud claims (for example that Klinge was acting as a “merchant” since she intended to re-sell the gems and, as such, she falls outside the consumer protection statutes). But there is a related and over-arching theme that Ms. Klinge was simply a market participant who should bear the consequences of her decision to buy approximately $1,000,000 worth of jewelry and gemstones from GSM. If she overpaid, too bad for her.

Klinge’s position, on the other hand, appears to be that she was a vulnerable, unsophisticated buyer exploited by GSM’s hard-selling tactics, its sales-people’s misleading wheedling and cajoling, which caused her to pay too much for a “3.04 carat Pigeon Blood Red African Ruby Pear” (for which Klinge paid $7,900), a “6.12 carat Tsavorite Garnet Portuguese Round” (for which Klinge paid $31,280), and so on.

When do we let the losers in market transactions live with their losses? When do we step in on their behalf?

DiceIt has been too long since I have made a prediction on Minnesota Litigator so I will roll the dice on this one. I think that U.S. District Court Judge Joan N. Ericksen (D. Minn.) will let the chips fall where they fell — that is, that Plaintiff will have to live with her losses and GSN’s conduct, perhaps shady and unattractive to some or many of us, was simply the conduct we all should expect from gem sellers and the like. Ms. Klinge went into and out of the gem buying and selling business. Maybe that’s how capitalism is supposed to work?

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