Yesterday, the Second Circuit reversed a decision by Judge Scheindlin granting summary judgment in favor of two plaintiffs seeking to confirm ownership of a 7.4-carat diamond under the UCC’s “merchant entrustment” rule (see our original coverage of the case here).  The defendant below, the original owner of the diamond, had lent the diamond to a celebrity stylist who apparently stole the diamond at some point in the past.  When asked to determine if the stylist was a “merchant” who could transfer the rights to a later owner (the plaintiffs below and appellants in the Second Circuit action), Judge Scheindlin found that the stylist was a “merchant” because he had “knowledge or skill peculiar to the practices or goods involved in the transaction.”  The Second Circuit construed the relevant UCC language to also require that the merchant “deal in goods of that kind” — which the stylist did not do — and thus allowed the original owner (the defendant) to pursue recovery of the stolen diamond from the innocent buyers (the plaintiffs).