Art Law Year in Review
In 2021, Grossman LLP continued to be at the forefront of high-profile litigation and trends in the art-law field, securing numerous important wins in state and federal court.
Total Victory Following 3-Day Bench Trial to Recover Artwork Stolen from Major CollectionThe firm secured a plaintiff’s victory as lead counsel in the Southern District of New York on behalf of a Fortune 100 company, whose important painting by an American modernist artist had been stolen from its corporate art collection over 30 years ago and replaced with a skilled forgery. Following a three-day bench trial, the Court granted judgment in favor of our client. En route to trial, we achieved two important preliminary wins in the case, first securing a transfer of the case from Illinois to New York, and then obtaining a ruling that the company’s claims to recover the painting were timely as a matter of law. After trial, the Court sided with our client, finding that it had successfully demonstrated superior title to the painting, free of any claims by its current possessors, and the stolen work has now been safely returned to our client. Defendants have appealed from the final judgment, and we recently briefed the appeal to the Second Circuit, where oral argument is scheduled for early 2022.
Complete Victory for Gallery Arising From $12 Million Sale of Gilbert Stuart PaintingIn July 2021, the firm achieved a total win for the Hirschl & Adler Galleries and its owner in a suit arising out of the sale of a Gilbert Stuart portrait of George Washington. Billionaire art collector Michael Steinhardt had alleged that after purchasing the work for $5 million, he consigned it to Hirschl & Adler “for sale to sell for ten million dollars ($10,000,000.00) net to you.” The Gallery eventually located a buyer who agreed to pay $12 million for the painting, and the Gallery remitted the agreed-upon $10 million to Steinhardt, who then sued the Gallery, challenging the validity of the contract’s “net to you” consignment structure. On July 26, 2021, the court agreed that Steinhardt’s claims should be dismissed with prejudice, holding that the Gallery had not breached its fiduciary duty to Steinhardt where he never claimed to be confused by the meaning of a “net to you” consignment, and as a sophisticated collector, he voluntarily entered an agreement “in which the risk of the Portrait selling for more or less than $10 million was clearly allocated between two sophisticated parties.”
$3 Million Judgment for Art Collector Arising from Sale of Picasso PaintingThe firm recently obtained a $3 million judgment for an art collector defrauded by an art dealer in connection with the sale of a Pablo Picasso painting. After the defendant failed to pay any portion of the judgment, we aggressively pursued post-judgment discovery, revealing that the dealer had transferred the $3 million owed to our client instead to a major art gallery in connection with a totally unrelated art deal. We immediately served restraining notices on the gallery’s bank, effectively freezing $3 million in the account. After the gallery filed a lawsuit challenging the restraining notices, the Court sided with our client, finding that the money should remain frozen, and on August 23, 2021, the Court entered an Order releasing the $3 million to our client to satisfy the unpaid money judgment.
Complete Dismissal of NBCUniversal Exec’s Lawsuit Over Sale of Forged Rothko PaintingIn August 2021, we obtained a complete dismissal of a federal lawsuit filed by NBCUniversal executive Ron Meyer arising out of a 2001 art deal involving a painting, purportedly by famed abstract expressionist Mark Rothko, which turned out to be a forgery. After the case was filed in state court in California, where Meyer lives, we succeeded in transferring the case to federal court in New York, where our client is located. In mid-2020, we filed a motion to dismiss the complaint, and on August 16, 2021, the court granted our motion in its entirety, dismissing the complaint with prejudice. The Court ruled that Meyer’s fraud claim was fatally flawed because he failed to provide any non-conclusory factual allegations that our client knew that the representations she allegedly made to Meyer about the painting were false. The Court also held that the claims were time-barred, where Meyer should have discovered his claim as early as 2011, when Meyer learned that the FBI was investigating a group of possibly forged Rothko artworks.
Second Circuit Affirmance Dismissing Title Claims Involving Calder MobileAfter obtaining a summary-judgment victory in 2020 on behalf of a Manhattan gallery in a title dispute concerning an Alexander Calder stabile, the Firm won a unanimous affirmance on appeal in the Second Circuit. The dispute centered on a Calder work originally gifted by the artist to his lawyer, who then bequeathed the work at his death to his wife. In 2001, the son, as the executor of the stepmother’s estate, took possession of the work, and eventually sold it in 2016 to the firm’s client, the Helwaser Gallery. When the sister learned of the sale, she sued Helwaser seeking the return of the work, claiming that her brother did not have full authority to sell the work without her permission. The Court agreed with us on summary judgment that the executor had broad power to deal with the work, and that the sister had not proved that she had received an actual ownership interest in the work itself. On appeal, after oral argument, the Second Circuit unanimously affirmed summary judgment in our client’s favor.
OTHER NOTEWORTHY DEVELOPMENTS
Representing Swindled Victims in $85 Million International Art FraudThe Firm is continuing to represent a number of victims in ongoing lawsuits arising out of a massive international art fraud scheme perpetrated by now-disgraced art dealer Inigo Philbrick, who recently pleaded guilty to federal charges of wire fraud in November.
Judd Grossman Once Again Recognized by Chambers as One of the Country’s Leading Litigators in the Field of Art and Cultural Property LawThe Chambers Review describes Grossman as “a great lawyer,” particularly for “commercial disputes in the art market,” citing his “excellent, well-written, top-notch work.” “He is great, especially on the litigation side and in disputes connected to ownership,” notes an industry insider, who adds that “there is no messing with Judd.”
Co-Authored Article About Anti-Money-Laundering Regulations in the Art MarketIn March 2021, Judd Grossman and Kate Lucas, along with attorneys from Latham & Watkins LLP, co-authored an article for ARTnews discussing legal developments in federal anti-money-laundering efforts. The article discussed recent actions by federal regulators and lawmakers, including the possible implications for art dealers, collectors, and others engaged in the art trade.
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