New York, Not Swiss Law Applies to Lawsuit Over “Stolen” $40M Princie Diamond
May 18, 2019
In a recent decision by the New York County Commercial Division (Borrok, J.), the Court held that New York law, not Swiss law, applies to a dispute involving the ownership of the storied Princie Diamond – an extremely rare and valuable 34.65 carat pink diamond quarried from the legendary Golconda mines of India. In a wide-ranging, multi-part decision, Justice Borrok applied the “interest analysis” to determine that New York, not Switzerland, clearly has the greatest interest in the litigation.
The Plaintiffs in Angiolillo v Christie’s, Inc., et al.., 2019 NY Slip Op 29122 (Apr. 26, 2019) are the heirs of Renato Angiolillo (“Angiolillo”), an Italian Senator who purchased the Princie Diamond from Van Cleef & Arpels in 1960. Under Italy’s inheritance laws, Angiolillo’s surviving spouse, Maria Girani Angiolillo (“Girani”) took custody, but not ownership, of the Princie Diamond when Angiolillo died in 1973. After Girani’s death in 2009, Plaintiff Amedeo Angiolillo (Angiolillo’s eldest son) attempted to contact Girani’s son, Marco Bianchi Milella (“Milella”) for the return of the diamond. But, Milella claimed he had never seen the Princie Diamond and had no knowledge of its whereabouts. The Plaintiffs ultimately contacted the Italian authorities, and a criminal investigation of the missing Princie Diamond ensued.
Milella later admitted to taking the Princie Diamond, but maintained that he had lawfully inherited the diamond from his mother. By this point, however, and unbeknownst to Plaintiffs, the diamond had already been transported from Italy to Switzerland on consignment, and then to New York, where it was consigned and transported to defendant Christie’s, Inc. (“Christie’s”). Throughout August and September 2010, Christie’s attempted to privately sell the Princie Diamond to prospective buyers from around the world.
In October 2010, while Christie’s was still trying to privately sell the diamond, defendant Investel Finance, Ltd. (“Investel”) purchased the diamond from Milella by wiring $19.2 million into Milella’s Swiss bank account. The Princie Diamond was located at the Geneva Freeport, a storage facility in Switzerland, at the time of its purchase. Investel then consigned the Princie Diamond to Christie’s for $40 million, and designated Christie’s as the exclusive seller of the diamond. In 2013, after three years of unsuccessfully attempting to privately sell the Princie Diamond, Christie’s began negotiations to publicly auction the diamond in New York.
Christie’s apparently did not investigate the provenance of the Princie Diamond until March 2013, when it learned of the Italian news articles concerning the investigation of Milella. In April 2013, Plaintiffs’ counsel contacted Christie’s advising that it was “a great likelihood, almost a certainty” that the diamond was stolen property, and requesting that Christie’s investigate and determine the proper title of the seller. In response, Christie’s confirmed that the diamond was in fact the missing Princie Diamond, but advised that, under Swiss law, Investel had acquired full title and ownership of the Princie Diamond, including the right to consign the diamond to Christie’s for auction. In 2013, Christie’s sold the Princie Diamond at an auction for nearly $40 million. Plaintiffs thereafter sued Christie’s, Investel and others for, inter alia, conversion and replevin.
In August 2018, Plaintiffs moved for summary judgment on their claims. Defendants cross-moved for summary judgment arguing, among other things, that they acquired good title to the gem as bona fide purchasers under Swiss law. The issue before the Court was whether New York or Swiss law applied to the claims.
The Court’s Choice of Law Analysis
Is There A Conflict Between the Two Laws?
The Court first determined that there is a “well-recognized conflict” between New York and Swiss law with respect to issue of title. Under New York law, “a thief cannot pass good title,” even if the chattel falls into the possession of a good-faith purchaser for value (Solomon R. Guggenheim Found. v Lubell, 77 NY2d 311, 317 ). Under Swiss law, however, a bona fide purchaser can become the owner even if the chattel was stolen or otherwise transferred without the authorization of its owner.
Given the Conflict, Which Law Applies?
In determining which law applies, the Court conducted an “interest analysis,” which essentially asks: which jurisdiction has the greatest interest in the litigation? Under this test, the Court determined that New York clearly has the greatest interest in the ligation because New York has an “overwhelming interest” in “preserving the integrity of transactions within its borders” and preventing the state from becoming “a marketplace for stolen goods” (Bakalar v Vavra, 619 F3d 136, 144 [2d Cir 2010]; Reif v Nagy, 61 Misc 3d 319, 323 (Sup Ct, NY County 2018]; Gowen v Helly Nahmad Gallery Inc., 60 Misc 3d 963 [Sup Ct, NY County 2018]). This is particularly so given New York’s reputation as being a world-renowned center for art and culture. As the Court explained:
“If the Plaintiffs’ claim to the Princie Diamond is credited, a stolen diamond was delivered in New York to a New York auction house, which for a number of years attempted to privately sell it to a buyer in New York and finally did sell it at a well-publicized and public New York auction. In addition, the defendants availed themselves of New York law in their respective agreements (particularly, the Auction Agreement), brought the Princie Diamond to the Gemological Institute of America in New York for purposes of grading and elevation, and presented it to numerous private buyers in New York for over three years.”
The Court flatly rejected Defendants’ argument that Swiss law should apply since the Princie Diamond was located in Switzerland at the time it was purchased, noting that “New York courts do not concern themselves with the question of where the theft took place.” In addition, the Court characterized as “inappropriate” what it considered to be Defendants’ “attempt to immunize an otherwise unlawful conversion by, essentially, passing the allegedly converted item through Switzerland.” As the Court pointed out, “Christie’s was aware of the fact that [Milella] was being investigated in connection with the criminal conversion of the Princie Diamond and, in an attempt to avoid the issues of title and avoid litigation, Christie’s threatened litigation, including over $20 million in damages. Now they try to claim the benefits of Swiss law under an essential restatement of the situs rule that New York courts have fully rejected.”
The Takeaway: The traditional “situs” choice of law rule for torts, which applies the law of the jurisdiction where the tort was committed, has been repeatedly rejected by New York courts in favor of the more flexible “interest analysis.” Under the interest analysis, the court must determine which jurisdiction has the greatest interest in the litigation. In cases involving title to potentially stolen property, New York’s interest is “overwhelming”: To discourage the illicit trafficking of stolen goods and protect New York’s reputation as a preeminent cultural center.