Mellen Incorporated v. Biltmore Loan and Jewelry - Scottsdale LLC

Filing 54

ORDER granting 13 Mellen's MOTION for Preliminary Injunction. Until further order of the Court, Biltmore must maintain exclusive possession of the diamond and may not sell, transfer, move or otherwise dispose of it. In addition, within 14 days of the date of this Order, Mellen shall post bond in the amount of $69,092.50. Signed by Judge Douglas L Rayes on 6/3/16. (LSP)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Mellen Incorporated, No. CV-16-00648-PHX-DLR Plaintiff, 10 ORDER 11 v. 12 Biltmore Loan and Jewelry - Scottsdale LLC, 13 14 Defendant. 15 16 This case involves a dispute over the ownership of a 4.05 carat blue heart-shaped 17 diamond worth approximately $2 million. Plaintiff moves to preliminarily enjoin 18 Defendant from selling, moving, or otherwise transferring the diamond pending the 19 resolution of this action. Doc. 13. The Court held oral argument on the motion on June 20 1, 2016. For the reasons below, the motion is granted. 21 BACKGROUND 22 For purposes of the preliminary injunction motion, the following facts are 23 undisputed unless otherwise noted. In June 2013, Plaintiff Mellen Incorporated acquired 24 a rare 4.05 carat internally flawless fancy blue heart-shaped diamond ring valued at 25 approximately $2 million. Doc. 15, ¶ 3. In January 2015, Mellen received a call from the 26 diamond dealer from whom it had purchased the ring. The dealer informed Mellen that 27 Scott Meyrowitz, a diamond dealer from Florida, was interested in taking the ring “on 28 1 memo” from Mellen to show to a potential buyer. Id.1 Because the dealer vouched for 2 Meyrowitz, Mellen contacted Meyrowitz via telephone. Id., ¶ 5. Meyrowitz stated that 3 he had a customer in Pittsburgh interested in purchasing the ring. Id. The parties agreed 4 that the memorandum price would be $2 million, and Meyrowitz provided proof of 5 insurance to cover the ring. Id., ¶¶ 5-6. Meyrowitz assured Mellen that he would keep 6 the ring in a vault at Wells Fargo Bank in Florida and would remove it to only to show to 7 customers. Id., ¶ 6. With these assurances, Mellen sent the ring to Meyrowitz via Brinks 8 transport. Id., ¶ 8. 9 Over the course of the next two months, Mellen periodically contacted Meyrowitz 10 to inquire about the status of the ring. Id., ¶ 9. At one point, Meyrowitz stated that a sale 11 was imminent and that the ring was on its way to Pittsburgh for the customer to inspect. 12 Id. No sale ever occurred, however, and after several weeks, it became increasingly 13 difficult to get a response from Meyrowitz. Id. Eventually, Mellen demanded return of 14 the ring, and Meyrowitz stated that he would ship it back to New York. Id., ¶ 10. In May 15 2015, Meyrowitz ceased contact with Mellen, failed to return the ring, and failed to pay 16 the memorandum price. Id., ¶ 11. 17 Unbeknownst to Mellen, once Meyrowitz received the ring, he immediately 18 contacted David Goldstein of Defendant Biltmore Loan and Jewelry – Scottsdale LLC 19 (“Biltmore”). Doc. 24 at 5.2 Meyrowitz told Goldstein that he knew someone who 20 wanted to pawn a diamond and asked whether Goldstein was interested. Id. Shortly 21 thereafter, Joseph Gutekunst called Goldstein and discussed pawning the diamond he 22 23 24 25 26 27 28 1 In the diamond trade, it is customary to “give merchandise to each other pursuant to written memorandum agreements (known as giving merchandise ‘on memo’).” Doc. 15, ¶ 4. In such an arrangement, the recipient takes possession, but not title, so that the merchandise can be shown to potential customers. Id. “If the recipient’s customer wants to buy the item, the recipient notifies the consignor (known as the ‘memo holder’) that he has found a buyer and asks the memo holder to send him an invoice with agreed upon payment terms.” Id. The transaction may be cancelled at any time before the invoice is paid, and if the recipient fails to return the item, he is liable to the memo holder for the amount stated in the memorandum. Id. 2 Goldstein states that he has known and dealt with Meyrowitz for over twenty years. Doc. 24-2, ¶ 4. -2- 1 owned. Id. Goldstein believed Gutekunst owned the diamond and that Meyrowitz was 2 “brokering the diamond ring for Mr. Gutekunst.” Doc. 24-2, ¶ 6. Goldstein asserts that 3 Meyrowitz told him that Gutekunst “had two diamonds and that Mr. Gutekunst needed 4 money for the expansion of his business.” Id. Goldstein believed that Gutekunst was in 5 the vitamin business and that Gutekunst had purchased the diamond from Meyrowitz. Id. 6 On February 2, 2015, the ring was delivered to Biltmore from a Wells Fargo bank 7 in Florida, “rather than [from] Mr. Gutekunst’s home state [of] Minnesota.” Doc. 24 at 5. 8 Goldstein examined the ring and requested a current Gemological Institute of America 9 (GIA) certificate. Id. On February 20, 2015, Meyrowitz sent the new GIA certificate to 10 Goldstein. Id. at 6. On February 26, 2015, Goldstein received a shipment containing 11 only the diamond—the ring mount was no longer included. Id. Nevertheless, Goldstein 12 and Gutekunst agreed that Gutekunst would pledge the diamond to Biltmore for a $1 13 million loan. Id. Gutekunst traveled to Scottsdale to sign the pawn contract, and on 14 March 4, 2015, Biltmore wired $1 million to a bank account designated by Gutekunst. 15 Id. at 7.3 16 additional $250,000. Id. at 8. On November 17, 2015, Biltmore wired $250,000 to a 17 bank account designated by Gutekunst. Id. In October 2015, Gutekunst offered to sell the diamond outright for an 18 In March 2016, Goldstein took the diamond to a trade show and located a buyer 19 willing to pay $1.625 million for the diamond. Id., ¶ 12. The buyer requested a current 20 GIA certificate, but by that time, GIA had “red-flagged” the diamond because Mellen had 21 reported it stolen to law enforcement. Id. Consequently, the buyer backed out. Id. 22 On September 28, 2015, Mellen filed suit against Meyrowitz and his company 23 SSB International LLC in Florida state court seeking a writ of replevin to recover the 24 ring. Doc. 13 at 6. On January 11, 2016, the Florida court ordered Meyrowitz to disclose 25 the location of the ring to Mellen. Id. After being threatened with contempt, Meyrowitz 26 stated that Gutekunst was holding the ring in a safe deposit box at a Wells Fargo Bank in 27 28 3 Biltmore had to take out a loan to fund the $1 million loan it extended to Gutekunst. Doc. 24 at 7. The loan has an interest rate of 4.25%. Doc. 24-2, ¶ 10. -3- 1 Minnesota. Id. Meyrowitz promised not to transfer the ring. Id. Immediately thereafter, 2 Mellen filed suit in Minnesota to recover the ring and obtained a temporary restraining 3 order preventing either Gutekunst or Meyrowitz from accessing the safe deposit box. Id. 4 at 7. When Mellen inspected the safe deposit box, however, the ring was gone. Id. In 5 March 2016, under threat of sanctions, Meyrowitz appeared at a deposition but invoked 6 his Fifth Amendment right against self-incrimination. Id. at 6-7. On March 2, 2016, 7 Mellen finally learned from law enforcement that the ring was in Biltmore’s possession. 8 Id. at 7. Both Mellen and Biltmore claim ownership of the diamond. 9 LEGAL STANDARD 10 “A plaintiff seeking a preliminary injunction must establish that he is likely to 11 succeed on the merits, that he is likely to suffer irreparable harm in the absence of 12 preliminary relief, that the balance of equities tips in his favor, and that an injunction is in 13 the public interest.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008); 14 Am. Trucking Ass’n, Inc. v. City of L.A., 559 F.3d 1046, 1052 (9th Cir. 2009). These 15 elements are balanced on a sliding scale, whereby a stronger showing of one element may 16 offset a weaker showing of another. See Alliance for the Wild Rockies v. Cottrell, 632 F. 17 3d 1127, 1131, 1134-35 (9th Cir. 2011). However, the sliding-scale approach does not 18 relieve the movant of the burden to satisfy all four prongs for the issuance of a 19 preliminary injunction. Id. at 1135. Instead, “‘serious questions going to the merits’ and 20 a balance of hardships that tips sharply towards the plaintiff can support issuance of a 21 preliminary injunction, so long as the plaintiff also shows that there is a likelihood of 22 irreparable injury and that the injunction is in the public interest.” Id. at 1135. The 23 movant bears the burden of proof on each element of the test. 24 Sacramento v. Slater, 184 F. Supp. 2d 1016, 1027 (E.D. Cal. 2000). 25 Envtl. Council of ANALYSIS 26 Mellen seeks to enjoin Biltmore from moving or selling the diamond. It also seeks 27 an order requiring the diamond to be held in the exclusive possession and control of 28 Biltmore or a court-appointed receiver during the pendency of this action. Mellen has the -4- 1 burden of demonstrating each of the four elements necessary to obtain preliminary 2 injunctive relief. The Court finds Mellen has met its burden. 3 I. Likelihood of Success on the Merits 4 Mellen argues that the memorandum under which Meyrowitz took possession of 5 the diamond “unambiguously shows that [Mellen] is the owner” of the diamond. Doc. 13 6 at 11. The memorandum signed by Meyrowitz states: 7 8 9 10 11 12 The merchandise described below, is delivered to you on memorandum, at your own risk from all hazards, regardless of the cause of the loss or damage, only for examination and inspection by prospective purchasers, upon the express condition that all such merchandise shall remain the property of [Mellen], and shall be returned on demand, in its full and original form. . . . You acquire no right or authority to sell, pledge, hypothecate or otherwise dispose of the merchandise . . . . Doc. 15-2 at 2. 13 Biltmore argues Article 2 of the Uniform Commercial Code (U.C.C.)4 governs the 14 dispute. It asserts the memorandum is irrelevant because it is a good faith purchaser of 15 the diamond under U.C.C. § 2-403(1).5 Alternatively, it asserts that Mellen entrusted the 16 diamond to Meyrowitz, thereby providing him the power to transfer all of Mellen’s rights 17 in the diamond to Biltmore under § 2-403(2). 18 A. Section 2-403(1) Likely Does Not Protect Biltmore’s Purchase 19 Biltmore asserts that Meyrowitz obtained voidable title to the diamond under a 20 “transaction of purchase,” and therefore, as a subsequent good faith purchaser, Biltmore 21 holds good title to the diamond. Section 2-403(1) provides, in relevant part: 22 23 24 25 A purchaser of goods acquires all title which is his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When 26 4 27 28 Article 2 of the U.C.C. governs “transactions in goods.” U.C.C. § 2-102. The diamond is a “good” within the meaning of Article 2. § 2-105(1). 5 Arizona has adopted the relevant provisions of the U.C.C. at issue in this case. See A.R.S. § 47-2403. -5- 1 2 3 goods have been delivered under a transaction of purchase the purchaser has such power even though . . . the delivery was procured through fraud punishable as larcenous under the criminal law. U.C.C. § 2-403(1). “Transaction of purchase” has been described by the Fifth Circuit as 4 13 generally limited to those situations in which the party who delivered the goods to the subsequent seller intended, however misguidedly, that the seller would become the owner of the goods. Thus, the con artist who fraudulently induces a manufacturer to deliver goods to him by means of a forged check has voidable title because he obtained delivery through a transaction of purchase, even though the defrauded manufacturer could bring criminal charges against the con artist; under section 2-403(1), the defects in the con artist’s voidable title would be cured by a sale to a good faith purchaser for value, and the good faith purchaser would obtain clear title, free from any claims of the manufacturer. But if the con artist merely converts the goods to his own use after having obtained possession of them in some manner other than through a transaction of purchase, he does not even have voidable title; instead, he has void title, and cannot pass good title even to a good faith purchaser for value. 14 Am. Standard Credit, Inc. v. Nat’l Cement Co., 643 F.2d 248, 268 (5th Cir. 1981) 15 (emphasis added). 5 6 7 8 9 10 11 12 16 Here, the record establishes that Meyrowitz obtained possession of the diamond 17 via “some manner other than through a transaction of purchase.” Id. The memorandum 18 executed between Mellen and Meyrowitz expressly states that the diamond “shall remain 19 the property of [Mellen]” and that Meyrowitz “acquire[s] no right or authority to sell, 20 pledge, hypothecate or otherwise dispose of” the diamond. Doc. 15-2 at 2. It also 21 provides: “This is NOT an INVOICE or BILL of Sale.” Id. This language indicates that 22 Mellen never intended Meyrowitz to become the owner of the diamond. Indeed, at least 23 two courts have held this same language precludes a “transaction of purchase” in the 24 wholesale diamond market. See Zaretsky v. William Goldberg Diamond Corp., --- F.3d - 25 --, No. 15-35, 2016 WL 1594595, at *10 (9th Cir. April 21, 2016) (finding that because 26 the terms of the consignment agreement provided that the consignee “acquire[d] no right 27 or authority to sell, pledge, hypothecate or otherwise dispose” of the diamond, no 28 “transaction of purchase” occurred and consignee “could not pass good title to -6- 1 subsequent bona fide purchasers for value”); Kimberly & Eur. Diamonds, Inc. v. 2 Burbank, 684 F.2d 363, 366 (6th Cir. 1982) (memorandum agreement stating that 3 consignee “acquire[d] no right or authority to sell, pledge, hypothecate or otherwise 4 dispose” of the diamond evidences that consignee “had no title, nor did she have 5 authority to pass title to [subsequent purchaser]”). 6 memorandum, Meyrowitz held no title to the diamond, could not pass good title to a 7 subsequent purchaser, and it is likely that Biltmore’s purchase is not protected by § 2- 8 403(1).6 9 Therefore, in light of the B. Section 2-403(2) Likely Does Not Protect Biltmore’s Purchase 10 Biltmore also asserts that Meyrowitz held voidable title to the diamond because 11 Mellen entrusted it to Meyrowitz. It argues, therefore, that Meyrowitz could convey 12 good title to subsequent purchasers in the ordinary course of business, such as Biltmore. 13 Section 2-403(2) provides that “[a]ny entrusting of possession of goods to a merchant 14 who deals in good of the kind gives him power to transfer all rights of the entruster to a 15 buyer in ordinary course of business.” U.C.C. § 2-403(2). “‘Entrusting’ includes any 16 delivery and any acquiescence in retention of possession regardless of any condition 17 expressed between the parties . . . and regardless of whether the procurement of the 18 entrusting or the possessor’s disposition of the goods have been such as to be larcenous 19 under the criminal law.” U.C.C. § 2-403(3). “The purpose of the entruster provision is to 20 enhance the reliability of commercial sales by merchants . . . by shifting the risk of resale 21 to one who leaves his property with [a] merchant.” Galin v. Hamada, No. 15-CV-6992 22 (JMF), 2016 WL 2733132, at *1 (S.D.N.Y. May 10, 2016) (internal quotation marks 23 omitted). Furthermore, “it is well settled that U.C.C. § 2-403(2) protects only persons 24 who buy in the ordinary course out of inventory.” 25 Consignments of Frozen Scallops, 4 F.3d 90, 97 n.8 (1st Cir. 1993). Evergreen Mar. Corp. v. Six 26 6 27 28 Biltmore argues, albeit unclearly, that Gutekunst acted as agent of Meyrowitz, or vice versa. Doc. 39 at 4-6. But this does not change the result under § 2-403(1). As agent, Gutekunst would only be able to transfer the title held by his principal, nothing more. Because Meyrowitz could not transfer valid title under § 2-403(1), neither could Gutekunst. -7- 1 1. Biltmore is Likely Not a Buyer in the Ordinary Course 2 A buyer in the ordinary course of business “means a person that buys in good 3 faith, without knowledge that the sale violates the rights of another person in the goods, 4 and in the ordinary course from a person, other than a pawnbroker, in the business of 5 selling goods of that kind.” U.C.C. § 1-201(9). It “does not include a person that 6 acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a 7 money debt.” Id. 8 For Biltmore to qualify as a “buyer in the ordinary course of business,” it must 9 have purchased the diamond from the merchant to whom the property was entrusted.” 10 Porter v. Wertz, 421 N.E.2d 500, 501 (N.Y. 1981) (emphasis added). But it is undisputed 11 that (1) Gutekunst sold the diamond to Biltmore, (2) Mellen did not “entrust” the 12 diamond to Gutekunst, and (3) Gutekunst is not a merchant.7 13 Gutekunst owned the diamond and that Meyrowitz was merely acting as broker. 14 Gutekunst made the sale in person, signed the forms, and did not otherwise indicate he 15 was acting on behalf of Meyrowitz. Biltmore also believed Gutekunst was in the vitamin 16 business and that he was selling the diamond to expand his vitamin business. Based on 17 these undisputed facts, the Court concludes Biltmore likely did not purchase the diamond 18 from “a person . . . in the business of selling goods of that kind,” i.e., a diamond 19 merchant.8 Biltmore believed 20 In addition, the manner of the transaction indicates that it was not made in the 21 ordinary course of business. “A person buys goods in the ordinary course if the sale to 22 7 23 24 25 26 Via the memorandum, Mellen delivered and acquiesced possession of the diamond to Meyrowitz in order to display it to potential buyers. Consequently, regardless of the memorandum’s terms and Meyrowitz’s ill intent, this constitutes “entrusting” within the meaning of §2-403(3). Because Meyrowitz is a merchant who deals in goods of the kind who was entrusted with the diamond, he possessed the ability to transfer all rights of Mellen in the diamond to a buyer in the ordinary course of business. § 2-403(2). Meyrowitz, however, did not sell the diamond to Biltmore. 8 27 28 The result would be no different if Gutekunst purchased the diamond from Meyrowitz before selling it to Biltmore. First, Gutekunst would likely not qualify as a good faith buyer without knowledge that the sale violates the rights of another under § 1201(9) because he is alleged to have conspired with Meyrowitz to misappropriate the diamond from Mellen. Second, Biltmore knew Gutekunst was not a diamond merchant. -8- 1 the person comports with the usual or customary practices in the kind of business in 2 which the seller is engaged or with the seller’s own usual or customary practices.” 3 U.C.C. § 1-201(9) (emphasis added). For example, “[a] person that sells oil, gas, or other 4 minerals at the wellhead or minehead is a person in the business of selling goods of that 5 kind.” Id. Setting aside the fact that Biltmore purchased a rare diamond from a man that 6 it knew was a vitamin salesman, the Court finds unlikely that it is customary or usual for 7 diamond merchants to pawn rare stones at substantial losses. The diamond at issue here 8 is believed to be worth upwards of $2 million, but Gutekunst pawned it for half its value. 9 Even after Biltmore purchased it outright for an additional $250,000, the sale price was 10 still well below the diamond’s alleged market value. Therefore, the Court finds this 11 transaction likely does not qualify as taking place in the ordinary course of business, and 12 Biltmore’s purchase is likely not protected under § 2-403(2).9 13 2. Agency 14 Biltmore argues Gutekunst acted as an agent of Meyrowitz, or vice versa. Doc. 39 15 at 4-6. But it does not explain how this would affect the analysis under § 2-403(2). Even 16 assuming Meyrowitz and Gutekunst engaged in some type of principal-agent 17 relationship, the Court is unconvinced the outcome would be different. The facts indicate 18 that (1) Biltmore believed Gutekunst owned the diamond; (2) Biltmore knew Gutekunst 19 was a vitamin salesman, not a diamond merchant; and (3) that diamond merchants do not, 20 in the ordinary course of their business, pawn valuable diamonds at a substantial loss. 21 These realities preclude Biltmore from attaining status as a buyer in the ordinary course 22 of business. Consequently, it is likely that any agency relationship between Meyrowitz 23 and Gutekunst does not affect the analysis under the relevant U.C.C. provisions.10 24 9 25 26 27 28 In addition, Biltmore acquired the diamond as security for the $1 million it extended to Gutekunst. When Biltmore decided to purchase the diamond, it forgave the $1 million loan and nearly $50,000 of interest that had accrued, and paid an additional $250,000. Because a buyer in the ordinary course does not include “a person that acquires goods . . . as security for . . . a money debt,” Biltmore also may not qualify for protection under § 2-403(2) for this reason. 10 At oral argument, Biltmore raised several new theories as to how an agency relationship would affect the outcome. However, these arguments did not appear in -9- 1 II. Irreparable Harm 2 Mellen bears the burden of establishing that it likely will suffer irreparable harm in 3 the absence of a preliminary injunction. See Winter, 555 U.S. at 21-23. “The possibility 4 that adequate compensatory or other corrective relief will be available at a later date, in 5 the ordinary course of litigation, weighs heavily against a claim of irreparable harm.” 6 Sampson v. Murray, 415 U.S. 61, 90 (1974). 7 Mellen argues it will likely suffer irreparable harm because it “has been chasing 8 the Diamond around the country and a preliminary injunction is needed to end this 9 chase.” Doc. 13 at 10. Mellen asserts the diamond is unique and cannot be adequately 10 valued via a grading report—it must be graded in person. Doc. 34 at 9. Therefore, if 11 Biltmore were allowed to sell it, Mellen may never have the chance to recover the 12 diamond and its true value may never be ascertained. Id. On the other hand, Biltmore 13 asserts money damages are adequate to compensate Mellen given that Biltmore found a 14 buyer willing to pay $1.625 million. Doc. 24 at 11. It further argues the diamond has no 15 sentimental value to Mellen and that Mellen was looking to sell the diamond anyway. 16 The Court finds Mellen has demonstrated that it will likely suffer irreparable 17 harm if a preliminary injunction is not entered. Mellen provided evidence that the 18 diamond in this case is not merely a commodity like other non-colored diamonds via the 19 declaration of Richard Mellen. 20 considered a “fancy color” and is extremely rare. Id., ¶ 3. The market for such diamonds 21 is “quite small,” and to “obtain the best price for one of these diamonds, a seller must 22 have both great knowledge of the marketplace and great patience.” Id. Mellen further 23 states that he “would not even seriously consider” an offer to purchase the diamond for 24 $1.625 million. Id., ¶ 5. Biltmore does not dispute the uniqueness and rarity of the 25 diamond. And the fact that Mellen wanted to display the diamond to a prospective buyer 26 does not undermine the diamond’s unique value, especially given Mellen’s testimony that Doc. 35, ¶ 2. Mellen states that the diamond is 27 28 Biltmore’s brief, Mellen has not had a chance to respond, and thus the Court will not address them. - 10 - 1 the value of such a diamond increases approximately 15% each year. Id. Biltmore’s 2 argument that damages in the amount of $1.625 million would adequately compensate 3 Mellen for the diamond is unpersuasive. 4 Accordingly, given that Mellen seeks return of a specific, rare item, the value of 5 which is not readily determinable, it is likely that Mellen will be irreparably harmed if 6 Biltmore is able to sell the diamond before its rightful owner is identified. 7 III. Balance of Equities and the Public Interest 8 The Court finds that the balance of equities favors Mellen. Mellen entrusted the 9 diamond to a diamond merchant whom another reputable diamond merchant 10 recommended to Mellen. Mellen had no knowledge or reason to believe Meyrowitz 11 would abscond with the diamond. An injunction will provide Mellen the opportunity to 12 establish that it is true owner of the diamond. On the other hand, Biltmore will continue 13 to incur interest on the loan it took out to fund the loan to Gutekunst. It will also be 14 prohibited from selling the diamond. But Biltmore admits it has known Meyrowitz for 15 over twenty years, though it denies knowledge of his transgressions.11 In addition, it 16 decided to enter into a pawn transaction with an individual that it knew was a vitamin 17 salesman, not a diamond merchant, for a rare 4.05 carat blue, heart-shaped diamond 18 worth nearly $2 million. Mellen stands to lose its claim on a unique diamond, while 19 Biltmore will merely incur additional interest on its loan during this litigation. The 20 balance tips in favor of Mellen. 21 The Court also finds that the public interest favors a preliminary injunction. The 22 public has a great interest in maintaining the status quo pending the determination of the 23 lawful owner of a valuable and precious item. Preventing a party from selling an item 24 with disputed ownership serves this interest. 25 IV. Bond 26 Mellen has established a likelihood of success on the merits, irreparable harm, and 27 11 28 Mellen later discovered that Meyrowitz had filed for bankruptcy in 2006, during which several individuals came forward alleging that Meyrowitz had misappropriated their diamonds. Doc. 13 at 6. - 11 - 1 that the balance of equities and public interest favor injunctive relief. 2 therefore grants Mellen’s request for a preliminary injunction and enjoins Biltmore from 3 moving, selling, transferring or otherwise disposing of the diamond at issue in this case. 4 Biltmore must hold the diamond in its exclusive possession during the pendency of this 5 action. The Court 6 The Court is mindful, however, of the potential harm to Biltmore, especially 7 should it establish that it is rightful owner of the diamond. Biltmore borrowed money to 8 fund its purchase of the diamond. Doc. 24-2, ¶ 10. It continues to pay down the loan, but 9 cannot sell the diamond. In order to accommodate the potential burden faced by 10 Biltmore, the Court will require bond based on the price Biltmore had been offered to sell 11 the diamond multiplied by the interest rate it is paying on the loan it acquired to purchase 12 the diamond. This amounts to $69,092.50, and will adequately compensate Biltmore 13 should it prevail in this litigation. 14 IT IS ORDERED that Mellen’s motion for preliminary injunction, Doc. 13, is 15 GRANTED. 16 possession of the diamond and may not sell, transfer, move or otherwise dispose of it. In 17 addition, within 14 days of the date of this Order, Mellen shall post bond in the amount of 18 $69,092.50 in accordance with Fed. R. Civ. P. 65(c). 19 Until further order of the Court, Biltmore must maintain exclusive Dated this 3rd day of June, 2016. 20 21 22 23 24 Douglas L. Rayes United States District Judge 25 26 27 28 - 12 -

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