Grossman LLP | <strong >Collector Sues London Art Gallery for Failing to Disclose Price History of Two Paintings</strong >
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  • Collector Sues London Art Gallery for Failing to Disclose Price History of Two Paintings
    02/20/2019
    A lawsuit pending in the United Kingdom continues the ongoing debate about how much due diligence buyers must perform when purchasing artwork, including whether such buyers must investigate price histories.   

    The entrepreneur and art collector Gary Klesch sued a London-based art gallery, Richard Green Fine Paintings, for failing to disclose the price histories of two paintings the collector purchased from the gallery.  Had the gallery disclosed those price histories, Klesch alleges, he never would have purchased the paintings in the first place. 

    The two Old Masters paintings at issue are Jan Brueghel the Elder’s River Landscape with Fishers and a Cart (ca. 1600-10) and Salomon van Ruysdael’s Winter Landscape with Figures Skating and Sleigh-Riding Outside a Town, with the Utrecht Dom and Huis Groenwoude at Right (ca. 1658).  Klesch bought the works from Green’s gallery at The European Fine Art Fair (“TEFAF”) in Maastricht last year for €5 million, paying €3 million for the Brueghel and €2 million for the van Ruysdael.  At the time, however, Klesch was unaware that the van Ruysdael had last sold at Sotheby’s in New York in June 2017 for $882,000, or roughly €775,000, and that the Brueghel had last sold in November 2017 at Lempertz in Cologne for €1,456,000, or roughly $1.6 million. 

    At the heart of Klesch’s lawsuit is the allegation that he would not have bought the paintings but for the Green gallery’s failure to provided him with these price histories during their negotiations.  As reported by Artnet, Jonathan Green, the gallery’s director, was “blindsided” by the lawsuit, having assumed that Klesch had looked up the paintings’ publicly-available price histories, and remarked that he would have disclosed the price histories to Klesch had he asked for them.  As Green further recounted, Klesch and his wife negotiated the purchase at TEFAF and the Klesch “family office reviewed and signed our terms and conditions and transferred the funds within a few days.”  In any event, Green stands by the sale prices, which he claims were fully justified.

    It remains to be seen whether the British court will squarely address the question of whether Green bore the legal burden of disclosing the publicly-available price histories to Klesch, or conversely, whether that was part of the due diligence Klesch should have done prior to the sale.  The terms and conditions of the parties’ contract, including any representations and warranties, may also be relevant to the parties’ dispute.  But this is just one of many recent cases exploring the duties a gallery or dealer may—or may not—owe to its buyers (see other examples here, here, here and here).  In many such cases, courts are increasingly examining factors such as how sophisticated the buyer is and how readily a buyer could have sought out or verified the information at issue.  As always, robust pre-sale diligence can be an important protection against buyer’s remorse.