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Here Are Reader Answers To “The Case of the Opposing Opinions”

When a client receives a lower color grade report on a purchased diamond, he asks for a partial refund.

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AFTER MONTHS OF research, data analyst Jack Meehan finally took the leap. In early January, he purchased a 2.03-carat cushion-shaped diamond from The Gem Exchange, a family-owned store with a great reputation in his hometown near Las Vegas. The diamond came with a GIA report indicating VS2 clarity and D color. The purchase price was $24,814 — a bit more than he’d planned to spend — but Jack was confident he’d gotten a good value and was comfortable with his purchase.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at [email protected]

Jack was working at his employer’s New York City office in the days following his purchase. On his way into the office one morning, Jack spotted a sign in the window of a diamond-district business that offered to laser inscribe a message onto the girdle of a diamond. Being a hopeless romantic, Jack thought that was a great idea.

While there, he spotted a setting that looked just like the one Kim had pointed out several times in stores and online as her favorite. The store owner offered him a great combination price on the ring, labor and inscription, and suggested that Jack also get a new insurance valuation document on the completed piece. He offered to get the evaluation done by a nationally known appraiser whose office was in the same building. Jack was delighted when he picked the ring up two days later – until he looked at the paperwork and noticed the diamond had been graded by the appraiser (before it had been set into the ring) as an F in color.

When he got back home, Jack took the diamond and all the paperwork back to The Gem Exchange. Terry Giles, the store owner, explained to Jack that it was not uncommon for two different people or even two different laboratories to grade the same diamond differently. In an attempt to resolve the dispute, Terry suggested that the diamond be taken to another independent source for examination. He agreed to pay for a re-evaluation of the diamond by a reputable industry laboratory in Las Vegas. It came as no surprise to Jack when, at the end of his appointment at the lab, he received a report stating that the diamond had once again been graded as an F color.

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Jack returned to The Gem Exchange the next morning. He told Terry that he really wanted to keep the diamond but wanted a refund for the difference in price between an F color and a D color diamond of the same size and clarity, which he estimated to be about $3,000. Unwilling to set a precedent with which he was not comfortable and convinced that he was correct in relying on the accuracy of the GIA report, Terry offered instead to refund the full purchase price on the diamond, in keeping with The Gem Exchange’s 100 percent customer satisfaction refund guarantee. Jack went home to think about it.

The following Monday, Jack sent an e-mail to Terry acknowledging the refund offer but stating, “I invested a great deal of time and effort in the selection of my diamond, and I intend to present my engagement ring within two weeks. I once again request that you simply send me a check for the confirmed difference in price between what I thought I bought (a D color) and what you actually sold me (an F color) — estimated by web research and other consumers and retailers to be approximately $3,000.”

The next day, a Gem Exchange attorney replied to Jack’s e-mail, rejecting the payment idea and explaining that even though two respected sources had graded the stone an F color, “the body color of a diamond is not the primary factor in determining the ultimate retail price of a diamond.” She added: “The color and clarity grades reported by any laboratory are subjective and are to be taken as an educated opinion. This is not an exact science — therefore, no one can guarantee a specific, completely consistent outcome.”

A lengthy (and costly) response from Jack’s lawyer outlined 24 points supporting his position and concluded with a request for $5,000 (adding legal fees to the previously accumulated total) to be paid within seven days.

The Gem Exchange attorney countered by claiming that Jack had in fact received what he had purchased — a diamond with GIA report indicating a D color. She reiterated that despite the inscription, Jack could simply return the diamond for a full refund or he could keep it, and as a show of good faith, The Gem Exchange would pay for the cost of the evaluation Jack had done by the New York appraiser.

Jack’s attorney replied, “This goes to the core of the dispute. We agree we were sold a diamond with a GIA report stating that the diamond is D color; however, we cannot agree that the diamond ‘is as described in the GIA report.’ We assert that we did not get what we paid for, evidenced by two documented evaluations from reputable experts that state our diamond is F color. We love this diamond and want to keep it — at the right price for what it is.”

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Terry felt strongly that while accepting Jack’s proposed resolution might have been a more cost-effective option for the store, it would also have meant admitting error — or worse — deception on their part — and would demonstrate a lack of confidence in the GIA documentation process.

The Big Questions

  • Does Jack have a legitimate complaint?
  • Would agreeing to his proposed solution really bring to bear the unintended consequences Terry feared?
  • If diamond grading and lab reports really are “educated opinions,” which lab should be the ultimate authority when they disagree? How might you have handled the situation if you were In Terry’s position?
Tom S.
Bradenton, FL

The best way to resolve this would be to remove the stone from the setting and resubmit it to the GIA to confirm that the diamond indeed matches the GIA diamond report. If it does, then Jack has to either keep the stone or return it. I don’t know if the two appraisers have diamond master sets or not, but after all, the grading system that we use was created by the GIA and they have the original set of color comparison master diamonds. There are a lot of appraisers out there that use CZ masters or don’t have a complete set of diamond masters or don’t have the training or experience to be effective at appraising. I believe that Terry was being more than fair.

Marcus M.
Midland, TX

This is the problem with relying too heavily on certs and involving too many outside opinions. Do you like the diamond? Do you think it’s beautiful? Are you comfortable paying for it? And do you trust the jeweler that is selling it to you? If you can answer yes to all of the above, then the GIA report is an added bonus at this point. Terry has been very accommodating, and I feel like he should stand his ground. If he caves to this, then he sets a dangerous precedent for future diamond sales with GIA reports. GIA is the most trusted lab in the United States, if not the world, and if you start having consumers question that, then the whole system goes in the toilet. Terry should offer to bring in another diamond that is actually graded an F color and give Jack the option to swap them out and get his “difference” back in price.

Jim C.
Fort Smith, AR

There seem to be several unknowns. Where did the appraisers receive their training? My guess would be the GIA or AGS? Probably both, but I would think that would establish the GIA as the higher authority. While they may be very qualified, I would think there are not many appraisers that assign a D color. What did the appraisers value the diamond? Was it less than he paid? It seems as though many appraisers over-value. At the end of the day, the customer received what he paid for. It is up to the store owner to set the price, not the internet or the customer. The store owner was more than fair to offer a full refund.

Jon B.
Madison, WI

The right solution is to give the client the credit from the rap price difference from D-F. Customer is happy and no legal issues. That, however, immediately drops the profits — and nobody wants that. Right? I envision the jeweler then reaches out to the supplier to take some pressure off. Unfortunately, most wholesalers who bill for a stone like this will not reduce the invoiced price, especially if this is aged inventory and not a fresh memo. This is likely why the path of least resistance for this jeweler was to have the client return the stone and hope it can be returned to the supplier. Don’t do that. It isn’t what the client wants. Appease the client. It’s a lose-lose in the name of customer service. Every minute wasted on the past is keeping you from sales in the present. “Thank you, NEXT!”

Jeffrey D.
Philadelphia, PA

In this situation, I’d compare the subject “D” color stone to other GIA-graded “D” color stones. If I felt the GIA had made an error, I’d contact them and discuss resubmitting the diamond to be rechecked for color. There are a multitude of factors that weigh in assessing a color grade. Ultimately, if the GIA regrades the diamond as a “D,” this should end the dispute once and for all as they are the industry authority. If they downgrade the stone, I’d consider refunding the buyer the difference. The selling store’s reputation has already likely taken a hit. Mitigate the damage with an act of good faith for the customer and move on. There are no winners in these situations, which is why it’s paramount to verify all of the stones of value, especially one in this size/quality range, to make sure that you reasonably agree with the lab’s assessment before offering them for sale.

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David S.
Toronto, ON

This happens to EVERYONE, even with GIA-certified stones. I simply say, “I will give you a full refund, but I will not discount it as I will lose money and I am personally 100 percent confident in my grading.”

Robert D.
Rochester, NY

Are the two independent appraisers’ documents certifying that they are definitively guaranteeing that the diamond F color, or do they use typical language implying that it’s an option? Opinions do have credibility. If either or both are willing to sign court documents that say they are willing to certify that the diamond is in fact an F color (not a D or E) — and I doubt they are — then their grading opinions hold far less weight than a respected grading lab. If they are willing to sign off, the retailer should question his resources and offer his customer some sort of store credit to comp his customer at a much lesser cost to him just for good will.

Jack R.
New York, NY

GIA is the ultimate lab in the world. Most accepted! There is no question. Storeowner was very forthcoming by offering to have this stone returned. GIA! The buck stops here.

Etienne P.
Camden, ME

The Gem Exchange has a policy where they offer a 100 percent satisfaction guarantee and they don’t negotiate on price. It’s simple, that is their business policy. Jack has two options: Keep the ring at the price offered or return it. Would it be best for customer relations to negotiate a deal with each customer? Maybe, but I highly doubt it. I believe that The Gem Exchange should stick to their way of doing business, even if they lose an occasional customer.

Joy Z.
Hollywood, FL

I believe if two additional independent evaluations rate the diamond an “F” color, it appears the original GIA evaluation of “D” color may have been faulty. Therefore, as an owner, I would quickly accept the solution to credit the buyer the difference between the “D” color value and the “F” color value, making the customer happy. GIA evaluations are not a science, and in rare situations, human beings make errors and this situation may be one of them. This is not admission that the store owner made an error. GIA may have made the error. This kind of error was not deception. Keeping a happy and informed customer is the goal. Allowing the situation to develop to an attorney level was not the best way to handle this delicate matter. Terry lost sight of the goal.

Troy L.
Irvine, CA

As the diamond had a GIA report, not AIG or EGL, the dispute should be made with them. GIA is the known standard in the industry, and if another gemologist questions their accuracy, the diamond should be sent back to GIA for a recheck.

Steve J.
Carefree, AZ

The diamond should have been sent out to another GIA grading center without the original cert. Should the diamond come back with an F color, then I would have probably offered a smaller refund or store credit. We, as jewelers, rely on these certs to be correct, but as noted, they are done by humans and mistakes happen. The cert should have a drawing of inclusions; was the diamond compared to the inclusion map?

Stuart T.
Bel Air, MD

As we all know in the industry, GIA India and GIA America do not always grade the same. GIA will tell you they do, but if you examine the diamonds yourself, you will sometimes see stones that are not what they graded. Since GIA does not inform us where stones are graded, we can only guess. Possibly this diamond was graded inaccurately? I would offer to send the stone back to the GIA to be rechecked. If the diamond came back with a F color grade, I would give the customer back the difference in cost. I would then contact the diamond supplier for an adjustment on his end. This is EGL Israel again. We as professionals SHOULD know what two color grades difference look like, and not to blindly report what a piece of paper says.

Bart M.
Reno, NV

Not only is diamond grading subjective, but diamonds are not a commodity. Two diamonds accurately graded the same may still look very different and may command different prices. This is especially true with cushions as GIA doesn’t even offer a cut grade for cushions (polish and symmetry only). In addition, diamonds may vary in transparency, which is not really addressed by either the clarity or color grade, but can affect appearance. I would remind Jack that he purchased a diamond, not a piece of paper. As pieces of paper go, the GIA report is as respected or more respected than any other. It is interesting that when opinions vary, we instantly jump to “Who is correct?” The fact is neither opinion is necessarily right nor wrong; they are just opinions. After reminding Jack he bought a beautiful diamond that is no less beautiful today than it was the day he bought it, I would acknowledge that I understand his distress and would like to do something for him. I would offer him $3,000 store credit.

David B.
Calgary, AB

This is a more common issue than most of us like to admit. First, GIA is not the industry “god” and there are a lot of GIA certified diamonds I reject, about 40 percent. A store owner needs to check his diamonds and not accept the GIA certificate is accurate. The offer of a refund is fair, but with a customer like this, use the KIS approach: Keep It Simple. Give him the difference back with a letter stating that no deception was admitted to sign off. Waiting for lawyers to get involved was a mistake as this now sets up an adversarial situation and costs escalate. As a store owner, just pay up and bite the bullet. After being done with the issue, go back to your supplier and raise hell. They may help you out. Ultimately, it is the store’s responsibility. Lessons to learn: 1. GIA is not 100 percent. 2. Check your goods when they arrive. 3. Don’t get into pissing into the wind with a customer.

Mitsuko H.
Watsonville, CA

We never had any problem like that in our forty years of the business. We only handle GIA-certified above half a carat. Also, any diamonds that come into our business have been checked and examined by our own member, who is a GIA graduate. Explain to the customer in advance who we are, and do the best we can and need the trust between both of us. Luckily, we trust the customers that come in, and they have been trusting us. It might take more time and cost a little more, but a small shop like ours, it is worth taking an extra precaution.

Karin V.
Milwaukee, WI

Maybe I am getting old, but after 40 years in the jewelry trade, I want my clients to walk away happy with me and my service. Bad feelings travel quickly. I would have given him the $3,000. Life is TOO SHORT! With legal fees, the jeweler probably spent $3,000!!

Greg K.
Los Angeles, CA

This could be a problem for any one of us in the industry. Let GIA deal with it and involve the lawyers — they created it.

Byron B.
Santa Rosa, CA

The customer’s return privileges ended when he chose to have the girdle laser-inscribed; no business would accept a refund/return on an altered piece of merchandise. A GIA lab report also has more credibility than any independent appraiser’s opinion. This is easy to explain to a reasonable customer. I think one reasonable approach would be resubmitting stone to the GIA. If it again came back graded as before, then customer pays for these added expenses. If it comes back a lower grade, then store owner should try to renegotiate price from their diamond wholesaler retroactively. I think chances are good that the diamond dealer would work with the store owner once the situation was explained. Then renegotiate a price with customer — a possible win for everyone. Sometimes we jewelers have to spend A LOT of extra time to please our customers. We have to earn our profits.

Allan A.
Bradenton, FL

It is still considered a colorless diamond. I would send it back to GIA. You have a choice to where to send it. You can send it to California or New York, although I would send it to where it was appraised. See how it comes back. I definitely feel the store should offer an adjustment. Remember, master stones can come in CZs as well as diamonds. The lighting can be different as well. A colorless diamond should only be graded loose. This is a tough call. No two diamonds are alike. I would work with the company you bought it from, and if not, get a refund and take your business elsewhere. Go where you feel comfortable in your purchase.

Adrienne R.
Los Angeles, CA

The customer should send the diamond back to the GIA in Carlsbad and ask GIA to verify that this is indeed the diamond that matches the report. If the diamond is stated to be exactly the same and is indeed judged a second time to be a D, the customer must be confident that D is the true color. If it is judged to be a lower color and does not match the original report (extremely unusual), then GIA is responsible for the error, and not the jeweler, who had probably purchased it as a D and paid the price of a D. The customer cannot be blamed for asking for a lower price, since he believed he was paying for something better than what was delivered. On the other hand, assuming the measurements and other particulars of the diamond are identical, the jeweler cannot be forced to offer a discount due to no fault of his own and has every right to cancel the sale with a refund in full.

Michael J.
Port Charlotte, FL

As jewelers should know by now, a lab report is simply an opinion, not a fact; the general public needs to learn this also. Based on my experience, it’s rare that GIA grades a diamond higher than other labs, but opinions do differ. With regard to this specific diamond and situation, I agree with the store owner and would not refund a difference according to the diamond’s grading but would definitely take the diamond back and refund the purchase price … all or nothing, basically. If the client is in love with the diamond, he should keep it, regardless of what the reports say. If he is not in love with the report for the diamond, he should return the diamond and find another one. This seems like another instance of buying the report, not the diamond.

Mark Thomas R.
Loveland, CO

The GIA documents should take precedence over any local lab or appraiser. Having graded many opals over the years, I have a keen appreciation for the vagaries of lighting. Since there is very small difference between “D” and “F” in diamond grading, it could be a difference in ambient light, a sunny day, some clouds, even a dirty light fixture that would make the difference. No one has the professional standing of GIA, and their word is gospel, in my opinion. Jack is just trying to save a few bucks.

Jim D.
Kingston, NH

My first thought is that laser cutting on a diamond leaves a blackened residue. Is it possible that the inscription is dark and has affected the body color of the stone? I do know that jewelers used to paint the girdles of slightly yellow diamonds in purple to neutralize the color. Did this happen here? If not, I would argue that the diamond was graded by the company that set the standards used in grading diamonds. They hold the master set of diamonds, and therefore, any deviance from the standards would be from a secondary source (like the nationally recognized expert upstairs). I would ask the GIA to weigh in with, at the very least, the process and expertise they used in grading the stone. It is actually their reputation at stake. I would, possibly, offer to have the GIA (blindly) regrade the stone. Under no uncertain terms would I acquiesce to the client’s demands, though I would love to read the 24 points of contention.

Tracy W.
San Gabriel, CA

We had a situation similar many years ago and we refunded the customer the “difference” in price. We still disagree with his premise, but losing the sale and angering the customer wasn’t worth making it an issue. Maybe this jeweler going forward could write a large disclaimer in red on every diamond receipt? Getting to the point of involving attorneys on both sides of this issue was a big mistake. Now no one will be satisfied with the outcome, and the attorneys still get their pound of flesh.

Jeremy A.
Los Angeles, CA

The store owner did everything right. The customer is trying to take advantage of the situation. I wonder if there are any standard purchase agreement forms that have arbitration agreements and ways to minimize legal fees when unreasonable clients try to sue or take advantage of situations? I also wish there were some repercussions to frivolous lawsuits like this one, which caused the store owner to pay thousands to defend themselves from an unreasonable client who was trying to unjustly enrich themselves.

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Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at [email protected].

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