15‐35

Zaretsky v. William Goldberg Diamond Corp.

1 UNITED STATES COURT OF APPEALS

2 FOR THE SECOND CIRCUIT

3 August Term, 2015

4 (Argued:  September 15, 2015     Decided:  April 21, 2016)

5 Docket No. 15‐35

6

7 STEVEN ZARETSKY, an individual, and SUZANNE ZARETSKY, an individual,

8 Plaintiffs–Counter Defendants–Appellees,

9 v.

10 WILLIAM GOLDBERG DIAMOND CORPORATION,  

11 a New York For‐Profit Corporation,

Defendant–Counter Claimant–Appellant.

 12

13

14 Before: NEWMAN, SACK, and LYNCH, Circuit Judges.

15 The parties assert competing claims of ownership of a 7.35 carat

16 pear‐shaped diamond.  The defendant appeals from a Final Order (treated as a

17 judgment, Fed. R. Civ. P. 54(a)) of the United States District Court for the

18 Southern District of New York (Shira A. Scheindlin, Judge) concluding that the

19 plaintiffs are the rightful owners of the diamond, and granting summary

20 judgment in their favor.  In a prior Opinion and Order, the district court

21 determined that the person to whom the defendant consigned the diamond was

                                                            

The Clerk of the Court is respectfully directed to amend the official caption as shown

above.
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Zaretsky v. William Goldberg Diamond Corp.

2

1 a ʺmerchantʺ under the second definition of section 2‐104(1) of the New York

2 Uniform Commercial Code, and for that reason alone qualified as a person who

3 could transfer rights to entrusted goods under a separate section of that code,

4 section 2‐403(2).  We conclude, however, that the district court erred in failing to

5 apply the requirement of section 2‐403(2) that a merchant entrusted with a good

6 can transfer rights to it only if that person ʺdeals in goods of that kind,ʺ which we

7 understand to mean regularly ʺsellsʺ goods of that kind.  Assessing the record on

8 summary judgment, we conclude that there is no material evidence to support

9 the application of section 2‐403(2) to this case.  The judgment of the district court

10 is therefore:

11 REVERSED and REMANDED with instructions to the district court to

12 enter summary judgment for the defendant.

13 HOWARD WINTNER, The Abramson Law

14 Group, PLLC, New York, New York, for

15 Defendant–Counter Claimant–Appellant.

16 WILLIAM I. STRASSER (Conrad M. Olear,

17 Gregory D. Emond, on the brief), Strasser &

18 Associates, P.C., Paramus, New Jersey, for

19 Plaintiffs–Counter Defendants–Appellees.

20 SACK, Circuit Judge:

21 In 2003, the appellant William Goldberg Diamond Corporation (ʺWGDCʺ)

22 consigned a large pear‐shaped diamond to Derek Khan, a celebrity fashion
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Zaretsky v. William Goldberg Diamond Corp.

3

1 stylist.  Khan, without WGDCʹs permission, subsequently sold the diamond to a

2 third party.  Through a series of transfers, the diamond ultimately came into the

3 possession of the appellees Steven Zaretsky and Suzanne Zaretsky (the

4 ʺZaretskysʺ).  Following Steven Zaretskyʹs attempt to insure the diamond, its

5 questionable provenance became apparent, and the instant litigation to clarify

6 title ensued.

7 Section 2‐403(2) of the New York Uniform Commercial Code (the

8 ʺNYUCCʺ) provides that ʺ[a]ny entrusting of possession of goods to a merchant

9 who deals in goods of that kind gives him power to transfer all rights of the

10 entruster to a buyer in ordinary course of business.ʺ  Whether Khan ʺdeals in

11 goods of that kindʺ under this provision—and could therefore effectively transfer

12 WGDCʹs rights to the diamond—is the primary issue on appeal.

13 The district court (Shira A. Scheindlin, Judge) did not decide that issue.  It

14 concluded that Khan had the power to transfer WGDCʹs rights to the diamond

15 under section 2‐403(2) solely because, ʺʹ[b]y his occupation,ʹ Khan clearly ʹ[held]

16 himself out as having knowledge or skill peculiar to the practices or goods

17 involved in the transaction.ʹʺ  Zaretsky v. William Goldberg Diamond Corp., 69 F.

18 Supp. 3d 386, 391 & n.33 (S.D.N.Y. 2014) (second brackets in original) (quoting
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Zaretsky v. William Goldberg Diamond Corp.

4

1 N.Y. U.C.C. Law § 2‐104(1)).  That finding established that Khan qualified as a

2 ʺmerchantʺ under the definition set forth in section 2‐104(1) of the NYUCC;

3 however, it did not establish that he transferred rights to the diamond under

4 section 2‐403(2).  By the terms of section 2‐403(2), Khan had the power to transfer

5 all rights in a ʺgoodʺ (the diamond) given to him by an ʺentrusterʺ (WGDC) only

6 if he was at the time a merchant who ʺdeals in goods of that kindʺ (diamond

7 jewelry and the like).

8 Although the New York Court of Appeals has not explicitly defined

9 ʺdeal[ing] in goods of that kind,ʺ persuasive authority from New York courts and

10 elsewhere leads us to conclude that the phrase means the regular sale of the kind

11 of goods at issue in the case.  Applying that definition, we conclude that the

12 Zaretskys have not raised a triable issue of fact as to Khanʹs capacity to transfer

13 title under section 2‐403(2) because there is no record evidence that he regularly

14 sold diamonds or other high‐end jewelry.  We further conclude that the

15 Zaretskysʹ remaining arguments—regarding the timeliness of this appeal,

16 whether the consignment is a ʺtransaction of purchaseʺ under section 2‐403(1) of

17 the NYUCC, and the defense of laches—are without merit.  We therefore direct

18 the district court on remand to enter summary judgment for WGDC.
15‐35

Zaretsky v. William Goldberg Diamond Corp.

5

1 BACKGROUND

2 Factual Background

3 WGDC, a New York corporation, identifies itself as one of the oldest and

4 most reputable American manufacturers and wholesale dealers of polished

5 diamonds and other high‐end diamond jewelry.  From June 2002 through

6 February 2003, WGDC consigned millions of dollarsʹ worth of such jewelry to

7 non‐party Derek Khan, a fashion stylist in New York who outfitted his clients for

celebrity events and photo shoots, often using this jewelry.1 8   Through the

9 wearing of its diamond jewelry by celebrities, WGDC hoped to boost its image,

10 prestige, and presumably, ultimately, its profits.  

11 In February 2003, WGDC consigned to Khan a pendant containing a pear‐

shaped diamond (the ʺDiamondʺ) weighing approximately 7.44 carats.2 12   The

13 consignment was made pursuant to a WGDC memorandum (the ʺConsignment

14 Agreementʺ) that Khan executed, and which stated that the document ʺ[wa]s not

                                                            

1 Khan is credited with originating the ʺBling!ʺ style—a cross between a ʺstreet styleʺ 

look and ʺcouture fashionʺ worn by celebrities and musicians—which combined large

quantities of diamonds and other expensive jewelry with high fashion.  Declaration of

Derek Khan, Joint Appendix (ʺJ.A.ʺ) 387 ¶ 8; cf., e.g., Mazhar Farooqui, Bling King: This is

my playground, Gulf News, Feb. 28, 2008, http://gulfnews.com/life‐style/glamour/bling‐

king‐this‐is‐my‐playground‐1.449054 (last visited Apr. 18, 2016).

2 For a photograph of the Diamond, see Michael Wilson, Hot Ice: The Tortuous Tale of the

Pear‐Shaped Diamond, N.Y. Times, May 9, 2014,

http://www.nytimes.com/2014/05/10/nyregion/hot‐ice‐the‐tortuous‐tale‐of‐the‐pear‐

shaped‐diamond.html (last visited Apr. 18, 2016).   
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Zaretsky v. William Goldberg Diamond Corp.

6

1 an invoice or bill of sale.ʺ  Joint Appendix (ʺJ.A.ʺ) 336 (capitalization removed).

2 The reverse side of the Consignment Agreement further provided that Khan

3 ʺacquire[d] no right or authority to sell, pledge, hypothecate or otherwise dispose

4 of the merchandise, or any part thereofʺ; that any sale of the merchandise ʺshall

5 occur only if and when [Khan] shall have received from [WGDC] a separate

6 invoice covering specific merchandise on the memorandumʺ; and that the

7 agreement was governed by New York law.  J.A. 338.

8 WGDC became worried when Khan, atypically, failed to return the

9 Diamond on time.  In or about February 2003, WGDC reported the

10 disappearance of the Diamond to the New York City Police Department.  Later

11 that month, WGDC retained the services of a private investigator to search for

12 the Diamond.  On March 19, 2003, WGDC also reported the theft to the

13 Gemological Institute of America (the ʺGIAʺ), a not‐for‐profit entity that grades

14 and certifies gemstones and maintains a database of stolen diamonds and other

15 jewelry.  Khan was subsequently convicted of the theft of many items, including

the Diamond, from WGDC and other jewelers.3 16    

                                                            

3 After his release from prison, Khan was deported to his native country of Trinidad

and Tobago.  His career as a fashion stylist nonetheless now appears to be thriving in
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Zaretsky v. William Goldberg Diamond Corp.

7

1 On March 17, 2003—two days prior to WGDCʹs report to the GIA—the

2 New York diamond supplier Louis E. Newman, Inc., submitted the Diamond

3 (now weighing, for reasons not disclosed in the record, 7.35 carats) to the GIA for

4 certification.  The certification was issued one week later.  The GIA apparently

5 did not realize that the gemstone reported stolen by WGDC and the gemstone it

6 certified for Louis E. Newman, Inc., were one and the same.  

7 In late 2003, Stanley & Son Jewelers, Inc. (ʺS&Sʺ), purchased the Diamond

8 from Louis E. Newman, Inc., on behalf of one Frank Walsh as a present for his

9 wife, Donna Walsh (together, the ʺWalshesʺ).  Some nine years later, in August

10 2012, Donna Walsh gave the Diamond to her daughter and son‐in‐law, Suzanne

11 Zaretsky and Steven Zaretsky, both New Jersey residents.  Steven Zaretsky

12 authorized another jeweler to appraise the Diamond for insurance purposes.  On

13 December 10, 2012, that jeweler submitted the Diamond to the GIA for

14 certification.  Soon thereafter, the GIA informed the Zaretskys that the Diamond

                                                                                                                                                                                               

Dubai.  See James Gabrillo, Derek Khan is getting a second bite of the cherry, The National,

July 3, 2012, http://www.thenational.ae/lifestyle/fashion/derek‐khan‐is‐getting‐a‐

second‐bite‐of‐the‐cherry (last visited Apr. 18, 2016); Eric Wilson, A Jewel Thiefʹs

Audacious Comeback, N.Y. Times, Apr. 17, 2008,

http://www.nytimes.com/2008/04/17/fashion/17CROOK.html (last visited Apr. 18, 2016).
15‐35

Zaretsky v. William Goldberg Diamond Corp.

8

1 appeared to have been stolen from WGDC in 2003.  The GIA has retained

2 possession of the Diamond pending a final resolution of its rightful owner.  

3 Procedural History

4 In June 2013, the Zaretskys brought a diversity action in the United States

5 District Court for the District of New Jersey against the GIA, WGDC, Eve

6 Goldberg (Vice President of WGDC), Louis E. Newman, Inc., and several

7 unidentified ʺJohn Doeʺ and ʺABC Corporationʺ defendants.  The Zaretskys

8 sought, among other relief, a declaratory judgment to the effect that they hold

9 proper title to the Diamond.   

10 In February 2014, a motion by Eve Goldberg and WGDC for a change of

11 venue to the Southern District of New York was granted by the New Jersey

12 district court, and the case was transferred to the Southern District.  The

13 Zaretskys then amended their complaint, adding Louis Newman & Company,

14 LLC, and S&S as defendants.  WGDC then answered and filed a counterclaim

15 against the Zaretskys for an order establishing its rightful ownership of the

16 Diamond.   
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Zaretsky v. William Goldberg Diamond Corp.

9

After the dismissal of several claims4 and parties,5 1 and the completion of

2 discovery, the Zaretskys and WGDC filed cross‐motions for summary judgment.  

3 In support of its motion, WGDC submitted a declaration by Eve Goldberg stating

4 that ʺKhan did not ever purchase or sell any diamonds from or to the WGDC,

5 and he was never involved or a participant in any transaction involving the sale

6 of a diamond or piece of jewelry of the WGDC to anyone, not even a celebrity

7 customer.ʺ  Goldberg Decl., Oct. 27, 2014, J.A. 326 ¶ 32 (emphasis in original).  

8 The record before the district court also contained a declaration by Khan that the

9 Zaretskys submitted in opposition to WGDCʹs motion, which describes the two

10 types of consignment agreements he had with various jewelers:

11 Under the terms of certain consignment agreements, . . . I would

12 provide the specified jewelry to certain celebrities or other well‐

13 known individuals[] for whom I was employed as personal stylist[.]  

14 [T]he particular individuals would receive the items for personal use

                                                            

4 See Zaretsky v. Gemological Inst. of Am., Inc., No. 14 Civ. 1113(SAS), 2014 WL 1678990,

at *1, 2014 U.S. Dist. LEXIS 58975, at *1‐2 (S.D.N.Y. Apr. 28, 2014) (dismissing

conversion, breach of fiduciary duty, and intentional infliction of emotional distress

claims against the GIA).

5 Before the case was transferred, the Zaretskys voluntarily dismissed their claims

against Eve Goldberg.  The transferee Southern District court then dismissed the GIA,

Louis E. Newman, Inc., and Louis Newman & Company, LLC, as parties to this action

pursuant to stipulation.  The court also dismissed S&S as a party after granting its

motion to dismiss in full.  See Zaretsky v. William Goldberg Diamond Corp., No. 14 Civ.

1113(SAS), 2014 WL 4160232, at *3, 2014 U.S. Dist. LEXIS 114636, at *11 (S.D.N.Y. Aug.

18, 2014).  Several other unnamed and unidentified defendants were never served.
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Zaretsky v. William Goldberg Diamond Corp.

10

1 and as prospective purchasers of the items.  Such terms would be

2 explicit within the consignment agreement[s] themselves. . . .

3 Under the terms of other consignment agreements, I was given

4 authority, by the consignor, to sell the specified items of jewelry to

5 those by whom I was employed as a stylist.  On multiple occasions[,]

6 several of the celebrities for whom I worked as stylist[] expressed a

7 desire to purchase the specific item of jewelry consigned to me.  I

8 would then introduce the particular prospective purchaser . . . to the

9 respective consignor to facilitate and complete the consignment sale

10 for the specific jewelry item.  Upon completion of any particular

11 sale, under the terms of the consignment agreements, I had the right

12 to receive a commission or compensation in the amount paid, by the

13 particular client, above the price set by the consignor.

14 Khan Decl., Nov. 7, 2014, J.A. 386‐87 ¶¶ 4‐5.

15 In its November 17, 2014, Opinion and Order deciding the summary

16 judgment motions, the district court described the partiesʹ positions thus:

17 WGDC argues that because Khan stole the diamond, he could not

18 hold title in the diamond—nor transfer title to it—as a matter of law.  

19 Therefore, WGDC argues that it is the rightful owner of the

20 diamond.  On the other hand, plaintiffs argue that Khan was not a

21 thief, but rather an entrusted merchant who held ʺvoidable titleʺ in

22 the diamond—and was therefore capable of transferring title—

23 under the Uniform Commercial Code . . . .  When the Walshes

24 purchased the diamond in 2003, plaintiffs argue that [the Walshes]

25 acquired good title to the diamond, which was subsequently

26 transferred to them.  Therefore, plaintiffs contend that WGDC is no

27 longer the owner of the diamond as a matter of law.  In the

28 alternative, plaintiffs argue that even if WGDCʹs legal theory is

29 correct, any replevin action is barred by the doctrine of laches, due

30 to needless and prejudicial delay.
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Zaretsky v. William Goldberg Diamond Corp.

11

1 Zaretsky, 69 F. Supp. 3d at 389.   The crucial issue in dispute, and the one on

2 which the district court ultimately granted summary judgment, was whether

3 Khan qualified as a merchant who could pass title to the Diamond.

4 To resolve that dispute, the district court considered two provisions of the

5 NYUCC.  Id. at 390.  The first, section 2‐104(1), defines the term ʺmerchantʺ in

6 three alternative ways.  The second, section 2‐403(2), provides that a merchant to

7 whom goods are entrusted is able ʺto transfer all the rights of the entruster to a

8 buyer in ordinary course of businessʺ only if the merchant ʺdeals in goods of that

9 kind.ʺ  N.Y. U.C.C. Law § 2‐403(2).   

10 Under the district courtʹs statutory interpretation, if the putative merchant

11 met any of the three alternative definitions in section 2‐104(1), that would be

12 sufficient to enable him or her to pass title to an entrusted good under section 2‐

13 403(2).  Zaretsky, 69 F. Supp. 3d at 390.  The court decided that Khan met the

14 second of those definitions because, in the courtʹs view, he had indisputably

15 ʺheld himself out as having knowledge or skill peculiar to the practices or goods

16 involved in the transaction.ʺ  Id. at 391 & n.33 (brackets removed) (quoting N.Y.

17 U.C.C. Law § 2‐104(1)).  On that basis alone, the court concluded as a matter of

18 law that Khan could transfer WGDCʹs rights to the Diamond under section 2‐
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Zaretsky v. William Goldberg Diamond Corp.

12

1 403(2).  See Zaretsky, 69 F. Supp. 3d at 390‐91 & nn.26, 32.  The court then granted

2 summary judgment in the Zaretskysʹ favor.  Id. at 392.

3 On December 12, 2014, the district court entered a separate ʺFinal Orderʺ 

4 adjudging the Zaretskys to be the rightful owners of the Diamond.  On January 5,

5 2015, WGDC filed a notice of appeal, contesting the district courtʹs summary

6 judgment decision and attaching a copy of the December 12 order.   

7 DISCUSSION

8 I. Standard of Review

9 We review the district courtʹs grant and denial of summary judgment de

10 novo.  Chen v. City Univ. of N.Y., 805 F.3d 59, 69 (2d Cir. 2015) (grant); Sergeants

11 Benevolent Assʹn Health & Welfare Fund v. Sanofi‐Aventis U.S. LLP, 806 F.3d 71, 86

12 (2d Cir. 2015) (denial).  In doing so, we ʺresolv[e] all ambiguities and draw[] all

13 permissible factual inferences in favor of the party against whom summary

14 judgment is sought.ʺ  Chen, 805 F.3d at 69 (quoting Burg v. Gosselin, 591 F.3d 95,

15 97 (2d Cir. 2010)).  Summary judgment is proper ʺif the movant shows that there

16 is no genuine dispute as to any material fact and the movant is entitled to

17 judgment as a matter of law.ʺ  Fed. R. Civ. P. 56(a).  
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Zaretsky v. William Goldberg Diamond Corp.

13

1 II. Timeliness of Appeal

2 The Zaretskys argue at the threshold that this appeal should be dismissed

3 as untimely.  Under Federal Rule of Appellate Procedure 4(a)(1)(A), a notice of

4 appeal must generally be filed ʺwithin 30 days after entry of the judgment or

5 order appealed fromʺ in a civil case.  The Zaretskys maintain that WGDCʹs notice

6 of appeal is deficient because it was filed on January 5, 2015, more than thirty

7 days after the district court issued its Opinion and Order on November 17, 2014.   

8 The Zaretskysʹ argument incorrectly assumes, however, that November 17

9 is the date of the entry of judgment and, consequently, the start of the thirty‐day

10 period to file the notice of appeal.  After issuing its Opinion and Order in favor of

11 the Zaretskys, the district court was required to set forth its judgment in a

12 separate document.  See Fed. R. Civ. P. 58(a) (providing that ʺ[e]very judgment

13 and amended judgment must be set out in a separate document,ʺ subject to

14 certain exceptions inapplicable in this case).  The judgment was not considered

15 ʺenteredʺ for purposes of Appellate Rule 4(a) until the district court issued that

16 separate document, which it did on December 12.  See Fed. R. App. P.

17 4(a)(7)(A)(ii) (providing that ʺ[a] judgment or order is entered . . . when . . . the

18 judgment or order is set forth on a separate document, or 150 days have run from
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Zaretsky v. William Goldberg Diamond Corp.

14

1 entry of the judgment or order in the civil docket[, whichever comes first]ʺ).  

2 WGDCʹs January 5 notice of appeal was timely filed within thirty days after that

operative date.  See Fed. R. App. P. 4(a)(1)(A).6 3

4 III. The ʺDeals Inʺ Requirement of Section 2‐403(2)

5 As the district court noted, two provisions of the NYUCC are relevant to

6 the partiesʹ competing claims to the Diamond.  The first is section 2‐104(1), which

7 provides three alternative definitions for the stand‐alone term ʺmerchantʺ under

8 the code:

9 [1] a person who deals in goods of the kind or

10 [2] otherwise by his occupation holds himself out as having

11 knowledge or skill peculiar to the practices or goods involved

12 in the transaction or  

13 [3] to whom such knowledge or skill may be attributed by his

14 employment of an agent or broker or other intermediary who

15 by his occupation holds himself out as having such

16 knowledge or skill.

                                                            

6 WGDCʹs notice of appeal is no less timely because it purports to appeal from the

ʺFinal Order entered on the 17th day of November, 2014.ʺ  Zaretsky, No. 14‐cv‐1113, Dkt.

No. 209.  The notice may simply contain a typographical error, inasmuch as WGDC

attached the December 12 Final Order to its notice of appeal.  See id.  Moreover, any

reference to the substantive scope of the appeal does not impact WGDCʹs time limit for

filing under Rule 4(a), compliance with which is ʺmandatory and jurisdictional,ʺ see

Silivanch v. Celebrity Cruises, Inc., 333 F.3d 355, 363 (2d Cir. 2003) (quoting Endicott

Johnson Corp. v. Liberty Mut. Ins. Co., 116 F.3d 53, 55 (2d Cir. 1997)), cert. denied sub nom.

Essef Corp. v. Silivanch, 540 U.S. 1105 (2004), and which criteria WGDC has satisfied here.
15‐35

Zaretsky v. William Goldberg Diamond Corp.

15

1 N.Y. U.C.C. Law § 2‐104(1) (emphases and bracketed numbers added; formatting

2 altered).  The second relevant provision is section 2‐403(2), which states that

3 ʺ[a]ny entrusting of possession of goods to a merchant who deals in goods of that

4 kind gives him power to transfer all rights of the entruster to a buyer in ordinary

course of business.ʺ  N.Y. U.C.C. Law § 2‐403(2) (emphasis added).7 5   Both of

6 these provisions precisely track the model Uniform Commercial Code (the

7 ʺUCCʺ).  See U.C.C. §§ 2‐104(1), 2‐403(2) (Am. Law Inst. & Unif. Law Commʹn

8 1977).

9 In concluding that the Zaretskys are the rightful owners of the Diamond,

10 the district court construed section 2‐403(2) as empowering anyone who qualifies

11 as a ʺmerchantʺ under section 2‐104(1) with the ability to pass title to an

12 entrusted good.  The court then considered whether, as a matter of law, Khan fit

13 any of the three definitions contained in section 2‐104(1).   The court determined

14 that whether Khan qualified as a merchant under the first definition—as a person

15 who ʺdeals in goods of the kindʺ—was a disputed question of fact that it could

16 not resolve, and that the third definition was inapplicable because there was no

                                                            

7 The parties do not dispute the ʺentrustingʺ of the Diamond by WGDC to Khan, nor

that Frank Walsh qualifies as a ʺbuyer in ordinary course of business.ʺ  See N.Y. U.C.C.

Law §§ 1‐201(b)(9), 2‐403(3) (defining these terms).
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Zaretsky v. William Goldberg Diamond Corp.

16

1 evidence that Khan employed any intermediary.  Zaretsky, 69 F. Supp. 3d at 390‐

2 91 & nn.26, 32.  But the district court then decided that Khan, by holding himself

3 out as having knowledge or skill peculiar to jewelry, was a ʺmerchantʺ under the

4 second definition contained in section 2‐104(1), and that the entrustment

5 provision under section 2‐403(2) therefore enabled him to transfer all rights to the

6 Diamond to others.  Id. at 391‐92.

7 We disagree with the district courtʹs construction of section 2‐403(2) of the

8 NYUCC.  Section 2‐403(2) enables a merchant to transfer rights to an entrusted

9 good only if the person is a ʺmerchantʺ who ʺdeals in goods of that kind,ʺ in this

10 case diamonds or other high‐end jewelry.  This entrustment provision therefore

11 applies to a person who is a ʺmerchantʺ under section 2‐104(1)ʹs first definition,

12 which itself includes the requirement that the person be one who ʺdeals inʺ the

13 relevant good.  But section 2‐403(2) does not necessarily apply to a person who is

14 a ʺmerchantʺ under the second or third definitions.  To qualify as a merchant

15 under those definitions, the person or entity need not ʺdeal[] in goods of that

16 kind,ʺ yet that is a prerequisite to being deemed a merchant with the power to

17 transfer rights to entrusted goods to a buyer under section 2‐403(2).  See N.Y.

18 U.C.C. Law § 2‐403(2); cf. U.C.C. § 2‐104 cmt. 2 (restricting the class of merchants
15‐35

Zaretsky v. William Goldberg Diamond Corp.

17

1 to which section 2‐403(2) applies ʺto a much smaller group than everyone who is

2 engaged in businessʺ and requiring that the merchant have ʺa professional status

3 as to particular kinds of goodsʺ).  Even if, as the district court determined, Khan

4 was a ʺmerchantʺ under section 2‐104(1)ʹs second definition, the court was also

5 required to find that Khan dealt in goods like the Diamond in order for him to

6 have transferred rights to it under section 2‐403(2).

7 IV. ʺDeals In Goods of That Kindʺ  

8 The district court did not decide whether Khan qualified as a ʺmerchant

9 who deals in goods of that kindʺ under section 2‐403(2).  In the district courtʹs

10 view, the parties had raised a genuine dispute of material fact on that point:

11 On the face of it, the Consignment Agreement contemplates the

12 possibility that Khan—subject to the WGDCʹs approval—will sell

13 jewelry to his clients.  The record suggests, however, that Khan

14 never actually sold the jewelry that he was consigned by WGDC.  

15 And it is unclear whether he ever sold jewelry consigned by other

16 jewelers.  The factual dispute, then, comes down to whether ʺdealing

17 inʺ jewelry, within the meaning of the UCC, depends on the terms of

18 the Consignment Agreement, or rather the established course of

19 business between the parties.

20 Zaretsky, 69 F. Supp. 3d at 391 n.32 (citations omitted).  Despite what the district

21 court perceived as factual disputes it could not resolve at the summary judgment

22 stage, each side contends on appeal that the record supports a grant of summary

23 judgment in its favor.   
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Zaretsky v. William Goldberg Diamond Corp.

18

1 The threshold question is:  What is required to establish that a person

2 ʺdeals in goods of that kindʺ?  The parties, unsurprisingly, disagree.  According

3 to WGDC, a person who ʺdeals in goods of that kindʺ is a person who is

4 regularly engaged in buying or selling goods like those at issue.  Appellantʹs  Br.

5 at 21. The Zaretskys, though, maintain that buying or selling certain goods is not

6 the only way to qualify as a person who ʺdeals.ʺ  In their view, a sale, although

7 sufficient, is not a necessary requirement to be a person who ʺdeals in goods of

8 that kindʺ; a person who otherwise ʺtransact[s] businessʺ within a particular

9 industry may also qualify.  Appelleesʹ Br. at 15, 19‐20.

10 The New York Court of Appeals has not provided definitive guidance on

11 this question.  The weight of persuasive authority, however, strongly indicates

12 that the Court of Appeals would conclude that a merchant who ʺdeals in goods

13 of that kindʺ is one who regularly sells those goods.

14 We first consult case law from New Yorkʹs Appellate Division, which

15 provides a ʺhelpful indicator[] of state law.ʺ  DiBella v. Hopkins, 403 F.3d 102, 113

16 (2d Cir.), cert. denied, 546 U.S. 939 (2005).  Indeed, ʺ[w]e are bound . . . to apply

17 the law as interpreted by New Yorkʹs intermediate appellate courts[ʹ] [relevant

18 cases] unless we find persuasive evidence that the New York Court of Appeals,
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Zaretsky v. William Goldberg Diamond Corp.

19

1 which has not ruled on th[e] issue, would reach a different conclusion.ʺ  Pahuta v.

2 Massey‐Ferguson, Inc., 170 F.3d 125, 134 (2d Cir. 1999).

3    In Town of Sullivan v. Sanford Fire Apparatus Corp., 185 A.D.2d 425, 585

4 N.Y.S.2d 613 (3d Depʹt 1992), the Third Department concluded that a person

5 must regularly sell the particular goods in question to be deemed ʺa merchant

6 who deals in goods of that kind,ʺ id. at 426, 585 N.Y.S.2d at 614.  In that case, the

7 plaintiff ordered a customized fire rescue vehicle from the defendant, which

8 obtained the chassis to build the vehicle from a third party.  Id. at 425, 585

9 N.Y.S.2d at 614.  The third party retained ownership over the chassis, but

10 delivered the chassis to the defendant.  Id.  When the defendant went out of

11 business, the chassis was repossessed and resold, and the plaintiff filed suit to

12 acquire title to it.  Id.  The Third Department held that the defendant was not a

13 merchant who dealt in goods like the chassis, and so had not passed title to it,

14 because the defendant ʺwas not in the business of selling chassisʺ and ʺonly

15 manufactured fire rescue vehicles using chassis obtained from other sources.ʺ  Id.

16 (emphasis added).  In reaching this conclusion, the court equated ʺdeal[ing] in

17 goods of that kind,ʺ N.Y. U.C.C. Law § 2‐403(2), with ʺselling goods of that kind,ʺ 
15‐35

Zaretsky v. William Goldberg Diamond Corp.

20

see id. § 1‐201(b)(9),8 1 a phrase which forms part of the definition of the term

ʺbuyer in ordinary course of business,ʺ9 2 see Town of Sullivan, 185 A.D.2d at 425‐

3 26 & n.1, 585 N.Y.S.2d at 614 & n.1.

4 The Appellate Divisionʹs interpretation finds support in a case from our

5 sister circuit, which has concluded that ʺthe phrase ʹdeals in goodsʹ is to be

6 construed as one who is engaged regularly in selling goods of the kind.ʺ  

7 Toyomenka, Inc. v. Mount Hope Finishing Co., 432 F.2d 722, 727 (4th Cir. 1970)

8 (collecting supporting authority); see also, e.g., Prenger v. Baker, 542 N.W.2d 805,

9 808 (Iowa 1995) (ʺThe requirement that the party ʹdeals in goods of that kindʹ is

10 generally interpreted to mean one who is engaged in regularly selling goods of

11 the kind at issue.ʺ (citing Toyomenka, 432 F.2d at 727)); see also Indep. News Co. v.

12 Williams, 293 F.2d 510, 513 (3d Cir. 1961) (concluding that a wholesaler qualified

13 as a merchant who dealt in comics because he regularly sold them); cf. Gallagher

14 v. Unenrolled Motor Vessel River Queen (Hull No. A‐681 84), 475 F.2d 117, 118‐19

15 (5th Cir. 1973) (affirming district courtʹs conclusion that a defendant who

                                                            

8 Subsequent changes to the NYUCC moved the definition of ʺbuyer in ordinary

course of businessʺ to section 1‐201(b)(9) (as opposed to section 1‐201(9), as referenced

in the Town of Sullivan decision).  See N.Y. U.C.C. Law § 1‐201(b)(9).

9 That the entrusted merchant can only transfer rights to a ʺbuyer in ordinary course of

businessʺ reinforces this comparison.  See N.Y. U.C.C. Law § 2‐403(2).
15‐35

Zaretsky v. William Goldberg Diamond Corp.

21

1 regularly rented stalls to boat owners did not pass title under the Texas

2 equivalent of UCC section 2‐403(2) when he sold a customerʹs boat, inasmuch as

3 the defendantʹs rental business did not render him a merchant who deals in

4 boats).   

5 The decisions the Zaretskys offer in support of their broader theory that a

6 person can ʺdealʺ without regularly selling a particular good are inapposite.  

7 They discuss: (1) UCC provisions pertaining to merchants that are unrelated to

8 section 2‐403(2), see Brown v. Mitchell‐Innes & Nash, Inc., No. 06 Civ. 7871(PAC),

9 2009 WL 1108526, at *4‐7, 2009 U.S. Dist. LEXIS 35081, at *12‐15, *18‐20 (S.D.N.Y.

10 Apr. 24, 2009) (assuming the defendants were merchants to decide if they, in line

11 with the higher ʺgood faithʺ standard imposed on merchants under section 2‐

12 103(1)(b) of the NYUCC, could be considered buyers in the ordinary course of

13 business); Natʹl Microsales Corp. v. Chase Manhattan Bank, N.A., 761 F. Supp. 304,

14 306 (S.D.N.Y. 1991) (deeming the defendant to be a merchant for purposes of

15 section 2‐201 of the NYUCC, pertaining to the statute of frauds); Pecker Iron

16 Works, Inc. v. Sturdy Concrete Co., 96 Misc. 2d 998, 1001‐02, 410 N.Y.S.2d 251, 253‐

17 54 (N.Y. Civ. Ct. 1978) (same); (2) putative merchants who regularly sold the type

18 of goods at issue, see Interested Lloydʹs Underwriters v. Ross, No. 04 Civ.
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Zaretsky v. William Goldberg Diamond Corp.

22

1 4381(RWS), 2005 WL 2840330, at *4, 2005 U.S. Dist. LEXIS 25471, at *11‐12

2 (S.D.N.Y. Oct. 28, 2005) (noting that a merchant is a person ʺin the business of

3 selling goods of that kind,ʺ and finding that the entrustee met this definition

4 under section 2‐403(2)); Graffman v. Espel, No. 96 CIV. 8247(SKW), 1998 WL

5 55371, at *4, 1998 U.S. Dist. LEXIS 1339, at *13‐14  (S.D.N.Y. Feb. 9, 1998) (similar),

6 affʹd sub nom. Graffman v. Doe, 201 F.3d 431 (2d Cir. 1999) (unpublished non‐

7 precedential opinion); or (3) instances where the court accepted the partiesʹ 

8 representation that the relevant entities were merchants, without addressing

9 whether the entities dealt in the goods at issue, see Davis v. Carroll, 937 F. Supp.

10 2d 390, 422 (S.D.N.Y. 2013).  These inapposite decisions do not persuade us that a

11 person who ʺdeals in goods of that kindʺ is not limited to one who regularly sells

12 that type of good.

13 V. Khan Did Not ʺDeal inʺ Diamonds or Similar Goods

14 This appeal turns on whether Khan regularly sold the kind of goods at

15 issue in this case: diamonds or other high‐end jewelry.  See Prenger, 542 N.W.2d

16 at 808 (dealing in ʺgoods of that kindʺ means ʺregularly selling goods of the kind

17 at issueʺ (emphasis added)); 3A David Frisch, Lawrenceʹs Anderson on the Uniform

18 Commercial Code § 2‐403:73 (3d ed. 2015) (ʺ[T]he entrustee must be a person who
15‐35

Zaretsky v. William Goldberg Diamond Corp.

23

1 deals in goods of the kind that are entrusted to him or her.ʺ (emphasis added)).  

2 Because the Zaretskys have submitted no material evidence that Khan regularly

3 conducted such sales, we conclude that WGDC is entitled to summary judgment.

4 The record supports WGDCʹs contention that Khan never sold any of the

5 diamonds WGDC consigned to him.  See J.A. 326 ¶ 32.  The terms of the

6 Consignment Agreement denied Khan any independent authority to sell the

7 Diamond and specified that a sale could only occur if he received a written

8 invoice from WGDC, J.A. 338, which WGDC did not provide to him.  There is

9 also no record evidence of Khanʹs participation in any specific sale of WGDCʹs

10 jewelry.  The only evidence bearing on Khanʹs potential involvement in selling

11 other diamonds or other high‐end jewelry is his own declaration, which WGDC

12 urges us to ignore because it was ʺmade by a convicted felon and habitual liar

13 who has fled to Dubai (and who[m] the WGDC had no ability to depose).ʺ  

14 Appellantʹs Br. at 13 n.4.  Even considering the contents of Khanʹs declaration

15 nonetheless, the Zaretskys have not raised a triable issue of fact as to whether

16 Khan regularly sold diamonds or similar items.

17 The Khan declaration does no more than identify two types of

18 consignment agreements pertaining to his relationships with jewelers; it does not
15‐35

Zaretsky v. William Goldberg Diamond Corp.

24

1 contain any statement of facts supporting his regular sale of diamonds or other

2 high‐end jewelry.  As described in the declaration, neither type of consignment

3 agreement presents a genuine issue for trial as to whether Khan dealt in the

4 relevant goods for purposes of section 2‐403(2).  Khan does not state that he

5 executed any sales of jewelry to ʺprospective purchasersʺ under the first type of

6 agreement (which appeared only to allow him to dress his clients with the

7 consigned item).  See J.A. 386‐87 ¶ 4.  Similarly, the declaration does not address

8 Khanʹs engagement in regular sales under the second kind of agreement (which

9 provided for commission if a client, following Khanʹs introduction to the

10 consignor, purchased the consigned item).  See id. at 387 ¶ 5.  At most, Khan

11 acted as a go‐between under this second type of agreement, not as a seller.  

12 Moreover, it does not follow from the fact that Khanʹs celebrity clients expressed

13 ʺ[o]n multiple occasionsʺ an interest in purchasing the consigned jewelry under

14 the second type of agreement that any sales of these items ultimately occurred.  

15 The Zaretskys cannot, by relying on such conclusory or vague statements, defeat

16 WGDCʹs motion.  See Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993).   

17 We further conclude that, under our understanding of the applicable

18 substantive law, the Zaretskys need not be afforded a chance to supplement the
15‐35

Zaretsky v. William Goldberg Diamond Corp.

25

record with additional evidence.10 1   Both parties had ample opportunity to

2 present their strongest evidence during the summary judgment proceedings as to

3 whether Khan is ʺa merchant who deals in goods of that kindʺ under section 2‐

4 403(2).  The type of supporting evidence the parties could offer to this effect is

5 not affected by the governing standards as we have described them because the

6 determinative issue—whether Khan ʺdeals inʺ diamonds or similar goods—is the

7 same.  We see no need to remand to develop the record further where, as here,

8 the Zaretskys obtained a declaration from Khan which ʺaffirm[ed] and clarif[ied]

9 the facts and circumstances surrounding [his] business and consignment

10 relationships with [WGDC] as well as several other high end jewelers and

11 jewelry designers from approximately 1994 through 2003.ʺ  Khan Decl., Nov. 7,

12 2014, J.A. 386 ¶ 1.  Cf. Potenze v. N.Y. Shipping Assʹn, 804 F.2d 235, 239 (2d Cir.

13 1986) (ʺ[R]evers[ing] the district courtʹs grant of summary judgment and . . .

14 grant[ing] summary judgment for the nonmoving party . . . is appropriate when

                                                            

10 In American Plastic Equipment, Inc. v. CBS Inc., 886 F.2d 521 (2d Cir. 1989), we

remanded for further development of the record to determine if the defendant qualified

as a merchant under the NYUCC, id. at 527‐28.  However, that case dealt with the

ʺmerchantsʹ exceptionʺ to the statute of frauds, section 2‐201(2).  Further, remand was

more appropriate in that case because the plaintiff had not had any opportunity to

respond to the statute of frauds defense, and we nonetheless indicated our conviction

that ʺ[s]urely no jury would have any difficulty concluding that [the defendant] . . .

[could] be considered a merchant under § 2‐201(2).ʺ  Am. Plastic Equip., 886 F.2d at 527‐

28.
15‐35

Zaretsky v. William Goldberg Diamond Corp.

26

1 the issues have been fully developed, the opponent has had a full and fair

2 opportunity to litigate the question, and no new facts would be developed on

3 remand.ʺ).

4 Finally, we note that our conclusion is consistent with the New York Court

5 of Appealsʹ assessment of the underlying purpose of section 2‐403(2).  It is, the

6 court tells us, ʺdesigned to enhance the reliability of commercial sales by

7 merchants (who deal with the kind of goods sold on a regular basis) while

8 shifting the risk of loss through fraudulent transfer to the owner of the goods,

9 who can select the merchant to whom he entrusts his property.ʺ  Porter v. Wertz,

10 53 N.Y.2d 696, 698, 421 N.E.2d 500, 500‐01 (1981).   It would be inappropriate in

11 light of that principle, we think, to shift the risk of loss to WGDC here:  Absent

12 evidence that Khan regularly sold diamonds or other high‐end jewelry, WGDC

13 had little reason to suspect that he would do so once the company entrusted the

14 Diamond to him.  

15 VI. Other Arguments

16 The Zaretskys present two final arguments in an effort to demonstrate

17 their rightful ownership of the Diamond, neither of which has merit.  They first

18 assert that the consignment was a ʺtransaction of purchaseʺ under section
15‐35

Zaretsky v. William Goldberg Diamond Corp.

27

1 2‐403(1) through which Khan obtained voidable title to the Diamond, and that all

2 subsequent purchasers of the Diamond would hold valid title to it.  Second, they

3 contend that the doctrine of laches prevents WGDCʹs recovery of the Diamond.  

4 Section 2‐403(1)

5 Section 2‐403(1) provides in pertinent part:  ʺA person with voidable title

6 has power to transfer a good title to a good faith purchaser for value.  When

7 goods have been delivered under a transaction of purchase the purchaser has

8 such power even though . . . the delivery was procured through fraud

9 punishable as larcenous under the criminal law.ʺ  N.Y. U.C.C. Law § 2‐403(1)(d).  

10 The Fifth Circuit has defined the phrase ʺtransaction of purchaseʺ contained in

11 Alabamaʹs version of the UCC to be

12 generally limited to those situations in which the party who

13 delivered the goods to the subsequent seller intended, however

14 misguidedly, that the seller would become the owner of the goods.  

15 Thus, the con artist who fraudulently induces a manufacturer to

16 deliver goods to him by means of a forged check has voidable title

17 because he obtained delivery through a transaction of purchase,

18 even though the defrauded manufacturer could bring criminal

19 charges against the con artist; under section 2‐403(1), the defects in

20 the con artistʹs voidable title would be cured by a sale to a good faith

21 purchaser for value, and the good faith purchaser would obtain

22 clear title, free from any claims of the manufacturer.  But if the con

23 artist merely converts the goods to his own use after having

24 obtained possession of them in some manner other than through a

25 transaction of purchase, he does not have even voidable title;
15‐35

Zaretsky v. William Goldberg Diamond Corp.

28

1 instead, he has void title, and cannot pass good title even to a good

2 faith purchaser for value.

3 Am. Standard Credit, Inc. v. Natʹl Cement Co., 643 F.2d 248, 268 (5th Cir. 1981)

4 (applying Alabama law); see also 1 White, Summers, & Hillman, Uniform

5 Commercial Code § 4:33 (6th ed.) (ʺIn order to be a party to the transaction [of

6 purchase], the seller must not just have initiated the transaction by making a

7 delivery but must have been involved in the conclusion by receiving the relevant

8 payment.ʺ).  We agree.   

9 Applying that definition to the case at bar, no ʺtransaction of purchaseʺ 

10 occurred because it is clear from the record that WGDC never intended for Khan

11 to become the owner of the Diamond.  Under the express terms of the

12 Consignment Agreement, Khan ʺacquire[d] no right or authority to sell, pledge,

13 hypothecate or otherwise dispose of the merchandise, or any part thereof.ʺ  J.A.

14 338.  Because Khan obtained possession of the Diamond by that strict

15 consignment, and not by a ʺtransaction of purchase,ʺ he could not pass good title

16 to subsequent bona fide purchasers for value under section 2‐403(1).  See Am.

17 Standard Credit, 643 F.2d at 268; see also Alexander v. Spanierman Gallery, LLC, 64

18 A.D.3d 487, 487, 883 N.Y.S.2d 492, 493 (1st Depʹt 2009) (deciding that the delivery
15‐35

Zaretsky v. William Goldberg Diamond Corp.

29

1 of a sculpture ʺonly for the purpose of its authenticationʺ was not a transaction of

2 purchase).

3 The Zaretskys seek to avoid this result by asserting that a ʺtransaction of

4 purchaseʺ nonetheless took place under one of three theories.   

5 First, they contend that because WGDC voluntarily delivered the Diamond

6 to Khan, the definition of ʺpurchaseʺ has been satisfied.  A ʺpurchaseʺ under the

7 NYUCC, however, must not only be ʺvoluntary,ʺ but it must also ʺcreat[e] an

8 interest in property.ʺ  N.Y. U.C.C. Law § 1‐201(b)(29).  As the Zaretskys

9 recognize, the Consignment Agreement ʺprovided no rights to Khan.ʺ  

10 Appelleesʹ Br. at 25.   

11 Second, the Zaretskys appear to rely on section 2‐401(1) of the NYUCC to

12 demonstrate that WGDC retained a ʺsecurity interestʺ in the Diamond upon

13 consignment, and that the transfer therefore qualified as a ʺpurchaseʺ under the

14 NYUCC because this term expressly encompasses security interests.  See N.Y.

15 U.C.C. Law § 1‐201(b)(29).  However, section 2‐401(1) has no relevance to this

16 issue because it addresses a contract for sale of goods to a buyer.  There was no

17 such contract here.
15‐35

Zaretsky v. William Goldberg Diamond Corp.

30

1 Third, the Zaretskys contend that the consignment amounted to a

2 ʺconditionalʺ sale of the Diamond because the Consignment Agreement gave

3 Khan the ability to sell the merchandise to his clients, subject to WGDCʹs

4 approval and separate invoicing of the item.  The Zaretskys cite Atlas Auto Rental

5 Corp. v. Weisberg, 54 Misc. 2d 168, 170, 281 N.Y.S.2d 400, 403 (N.Y. Civ. Ct. 1967)

6 for the proposition that, ʺ[i]f passage of title is dependent upon the performance

7 of some condition subsequent, this is a voidable title,ʺ and ensuing transfers of

8 that title to bona fide purchasers are valid.  As WGDC points out, however,

9 passage of title to the Diamond did not depend on a ʺcondition subsequentʺ;

10 rather, WGDC possessed unilateral authority under the Consignment Agreement

11 to determine whether a sale of the Diamond would occur.

12 Inasmuch as Khan did not obtain the Diamond through a ʺtransaction of

13 purchase,ʺ the Zaretskysʹ attempt to shoehorn their case within the confines of

14 section 2‐403(1) fails.

15 A. Laches

16 Lastly, the Zaretskys assert that the doctrine of laches applies in light of

17 WGDCʹs failure to exercise reasonable diligence in locating the Diamond, in that
15‐35

Zaretsky v. William Goldberg Diamond Corp.

31

1 WGDC neither pursued a civil action against Khan nor requested subsequent

2 searches of the GIAʹs database for the Diamond.   

3 Although the district court saw no need to address the laches defense

4 directly, it did indicate its view that the defense would be unavailable here.  We

5 agree with that conclusion and the district courtʹs reasons for it.  Under New

6 York law,

7 [l]aches is defined as such neglect or omission to assert a right as,

8 taken in conjunction with the lapse of time, more or less great, and

9 other circumstances causing prejudice to an adverse party, operates

10 as a bar in a court of equity.  The essential element of this equitable

11 defense is delay prejudicial to the opposing party[.]   

12 Capruso v. Vill. of Kings Point, 23 N.Y.3d 631, 641, 16 N.E.3d 527, 532, 992 N.Y.S.2d

13 469, 474 (2014) (citations omitted) (quoting Matter of Schulz v. State of New York, 81

14 N.Y.2d 336, 348, 615 N.E.2d 953, 957, 599 N.Y.S.2d 469, 473 (1993)).  The

15 Zaretskys have not shown that WGDC unreasonably delayed its search for the

16 Diamond.  As the district court recognized, ʺ[a]fter the disappearance of the

17 diamond, WGDC hired an investigator, notified the police, and reported the

18 diamond stolen to the GIA.ʺ  Zaretsky, 69 F. Supp. 3d at 389 n.15.  Nor have the

19 Zaretskys suffered prejudice as a result of any such delay because ʺit is not clear
15‐35

Zaretsky v. William Goldberg Diamond Corp.

32

1 that greater diligenceʺ by WGDC ʺwould have made a difference.ʺ  Id. (internal

2 quotation marks omitted).  As the district court correctly observed:   

3 Once [Louis E.] Newman[, Inc.,] came into possession of the

4 diamond—less than a month after WGDC lost it—seeking replevin

5 against Khan would have been futile.  And once the Walshes

6 purchased the diamond, a replevin action . . . would have posed to

7 [the Zaretskys], or to [the Walshes], exactly the same risk that the

8 action poses today—the prospect of being stripped of valuable

9 property that was acquired in good faith.

10 Id.  Thus, laches does not bar WGDCʹs recovery of the Diamond here.

11 CONCLUSION

12 For the foregoing reasons, the judgment of the district court is REVERSED

13 and REMANDED with directions to the district court to enter an order granting

14 summary judgment in favor of the defendant, WGDC.