Silver v. Nelson

Decision Date17 May 1985
Docket NumberCiv. A. No. 82-823.
Citation610 F. Supp. 505
PartiesSol SILVER, Plaintiff, v. Dr. Earl L. NELSON, Defendant.
CourtU.S. District Court — Eastern District of Louisiana




David Stone, New Orleans, La., for plaintiff.

Normand Pizza, New Orleans, La., for defendant.


CASSIBRY, Senior District Judge.

In this diversity case, the plaintiff Sol Silver seeks to hold the defendant Dr. Earl Nelson liable for the loss of close to $200,000 worth of diamonds and rings. The plaintiff delivered the diamonds pursuant to five diamond memoranda, one of which was signed by the defendant.1 The diamonds were never returned to the plaintiff, nor was he paid for them as promised under the terms of all five memoranda. The plaintiff alleges that the defendant is liable for the diamonds transferred pursuant to the memorandum he signed under the theory of conversion, or alternatively, breach of contract. The plaintiff further alleges that the defendant is liable for the diamonds delivered pursuant to the subsequent memoranda signed by or on behalf of a man using the name Herbert Kaye under three alternative theories of recovery: conspiracy to convert another's property, fraudulent misrepresentation, and negligent misrepresentation.

In addition to the value of the diamonds, plaintiff seeks damages for pain and suffering allegedly caused by the defendant's actions, punitive damages, and legal interest on any sum awarded.

The case was tried before the court, sitting without a jury, briefed, and submitted. After careful consideration, the court now enters the following findings of fact and conclusions of law in support of its judgment.


1. Plaintiff Sol Silver has been a diamond merchant engaged in buying, selling, and importing diamonds for at least forty years. He has offices in New York City and Israel. Mr. Silver is a resident of the state of New York.

2. Defendant Earl L. Nelson is an ophthalmologist with an office in Metairie, Louisiana. In addition to his medical practice, Dr. Nelson has engaged in the business of buying and selling diamonds. Dr. Nelson is a resident of the state of Louisiana.

3. In approximately the late fall of 1980, Silver and Nelson met in New Orleans, Louisiana through one of their mutual business associates, Gordon Goldman.2 Nelson represented to Silver that he was interested in purchasing diamonds and knew other prominent individuals who wanted to make significant investments in diamonds. Nelson subsequently obtained a diamond from Silver on memorandum, sold it, and paid Silver $500 less than the stated value of the diamond with the promise of more substantial sales in the future.

4. A short time after they met, Silver told Nelson that he was interested in selling the bulk of his merchandise and retiring from the diamond business. Nelson indicated that he knew a group of investors who were interested in purchasing a large quantity of diamonds. From late January to late February 1981, Nelson arranged several meetings in New Orleans in an apparent attempt to precipitate a diamond transaction with this group of investors. Nelson introduced Silver to Robert Webb, his associate and partner in the deal, and Tony Simonetti, a supposed representative of the buyers.3 Although the particulars of these early meetings are vague, the end result is that no sale was consummated.

A short time after the unsuccessful meetings in New Orleans, Dr. Nelson arranged and paid for a charter flight from New Orleans to Newark, New Jersey in another attempt to effectuate a sale of Silver's merchandise. The plan was that Robert Webb, Detective Robert Poitevent, Nelson's security guard at the previous meetings, and Detective Frank Hibbs, Silver's security guard, were to fly to Newark to collect the money from the investors. At that point, a phone call would be made and Silver would deliver the diamonds to Nelson in New Orleans. The plan was never put into operation, however, because midway through the flight, the pilot was instructed to return to New Orleans. The reason behind the cancellation of the trip was not revealed at trial.

5. In late February or early March of 1981, Nelson contacted Silver in New York and requested that he return to New Orleans with a large quantity of diamonds to sell to the investors. Silver arrived in New Orleans on March 5, 1981, and was informed of the newest arrangement: Nelson would take Silver's merchandise to Newark, make the sale, and return to New Orleans. Silver balked at this idea because of the quantity of diamonds involved and insisted that he accompany Nelson to Newark.4 Nelson attempted to assuage Silver's apprehension by explaining that he had arranged for the diamonds to be insured. Silver, however, remained adamant in his decision to accompany Nelson to Newark. He telephoned his son in New York, Dr. William Silver, from Nelson's office to discuss the proposed transaction.

Dr. Silver testified that he spoke with Nelson at his father's request. Nelson assured Dr. Silver that the group of investors, who insisted upon remaining anonymous, were reputable businessmen with whom Nelson had dealt in the past. Evidently convinced that all would go well, Silver and his son agreed to meet at the Newark airport the following day. Nelson arranged and paid for the flight from New Orleans to Newark for Silver and his security guard Detective Hibbs. By separate flight, Nelson and his security guard Detective Poitevent also traveled from New Orleans to Newark.

6. On the morning of March 6, 1981, a meeting took place in the Eastern Airlines Conference Room at the Newark Airport. The first to arrive were Silver, attended by his security guard Hibbs, Dr. William Silver, Dr. Earl Nelson, attended by his security guard Poitevent, Robert Webb, and Lieutenant McGrath, Webb's security guard. A short time later, four other men arrived: a man introduced by Webb as Herbert Kaye, another introduced as Kaye's diamond expert, Baron Castellano, and one of Castellano's deputies.

As would be revealed, Herbert Kaye, the alleged representative of the investors, was actually Herbert Kaminsky. In a case with some notable parallels to the one at hand, Kaminsky was tried and convicted of conspiracy to defraud, the use of a wire communication in interstate and foreign commerce in the execution of a scheme to defraud, and inducing an individual to travel in interstate and foreign commerce in the execution of a scheme to defraud in violation of title 18 U.S.C. sections 371, 1343, and 2314. See United States v. Benson, 548 F.2d 42 (2d Cir.1977). In addition, Kaminsky had prior convictions in 1967 for violating title 18 U.S.C. section 2315 and in 1976 for mail fraud.5

7. At the Newark meeting, Silver and Nelson displayed several diamonds to Kaye. Kaye inspected these diamonds and made disparaging comments about their quality. After some discussion, Kaye suggested that he be permitted to take five specific stones on memorandum in order to have them appraised and to show them to the prospective buyers. Kaye then mentioned the names of various individuals in New Orleans, who could vouch for his integrity. According to Detective Poitevent, Nelson's security guard and witness at trial, Kaye specifically named Carlos Marcello as a reference. Marcello's reputation as a figure in the Gulf Coast Mafia is notorious. Whether Silver knew of his reputation or not is unclear, but Nelson indicated at trial that he did not inform Silver of his identity.

At this point, Kaye and Nelson left the room accompanied by Detective Poitevent. Nelson made several phone calls to verify Kaye's references and testified that he was unable to reach any one. Nelson testified that he tried to call his father-in-law who he thought would know the people Kaye had mentioned. Nelson's father-in-law, Sam DiPiazza, is a native of New Orleans, and according to Dr. Nelson, this fact alone prompted the telephone call. The defendant admitted at trial that Sam DiPiazza was convicted for interstate gambling violations and served time in an Atlanta penitentiary. Nelson refused to concede that this had anything to do with his decision to call on DiPiazza to verify Kaye's references, but, in any case, did not tell Silver about his father-in-law's criminal background.

Nelson then called Silver out into the hall where he explained that several of the investors would not be available to inspect the merchandise until later that day or the next. Nelson further explained that the transaction would be decided on the basis of the five stones which Kaye had selected. The men returned to the conference room where more discussion took place. According to Dr. William Silver, Nelson represented to him that he had been able to verify Kaye's references and that there was no reason for concern. Dr. Silver testified that he and his father agreed to deliver the diamonds to Kaye on the condition that Nelson sign the memorandum and take full responsibility for the merchandise. Nelson complied with this request, filled out the memorandum, dated it, and signed his name. Silver took the memorandum and gave the stones to Nelson who in turn passed them to Kaye.

8. The memorandum, dated March 6, 1981, lists the five stones given to Kaye at the Newark meeting with their weight and price per carat. The total value of the diamonds, as shown on the memorandum, is $67,915. Silver has never received any payment for these diamonds, nor have the diamonds been returned.

9. The Newark meeting ended shortly after the memorandum was signed with the understanding that Kaye would contact Silver that afternoon or the next morning. Kaye did in fact telephone Silver the following day, March 7, 1981, and informed him that the investors wanted to see some additional merchandise before they would make a purchase. Kaye obtained possession of additional...

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